Business Structures: Companies

One of the most common business structures is that of a company. In this blog post, we will briefly explain some advantages and disadvantages that may result when you chose to operate your business through a company.

Advantages

A company is a separate legal entity which means that from the perspective of the law, a company has its own existence. This separate existence is what allows for one of the biggest advantages a company offers and that is of limited liability.

Limited liability means that the owners (shareholders) of the company will ordinarily have their liability limited to what they have invested. Should the business fail at a later point in the future, they would not be liable for the companies debts.

Another advantage of companies is that they are easy to grow and alter as new shareholders can enter and existing owners can exit without disturbing the company at an operational level.

Companies are also subject to a lower tax rate - 28%. When the profits are distributed, they are distributed via ‘dividends.’

Disadvantages

While there are numerous advantages of operating your business through a company, there are some disadvantages to be aware of.

The major issue all directors of the company should be aware of is that of director duties. As the directors are the ones who control the company, there are rules in place which must be complied with. Failure to comply with these laws, can have significant penalties such as making the director personally liable for the company’s debts.

As a company is it’s own separate entity, another disadvantage is that losses made by the company are ‘stuck’ in the company. While these losses can be offset against future profits, they cannot be offset against other income that you may have derived.

How we can Help.

At Murray Sharma & Associates, we can help you create your company and help you administer it. We can help you maintain the various registers, create the different documents that are required such as the constitution, minutes, resolutions etc along with providing you with the financial statements and filing of annual returns.

You can learn more about our different offerings such as accounting, business advisory and tax compliance. If you have any questions please contact us.