How To Change To a Limited Liability Company
There are plenty of benefits to running a limited liability company, with the most obvious being the reduced risk posed to your own, personal assets – outside of the capital you have invested into the business. Obviously, this comes at a price – namely, the privacy of your company’s financial accounts and its members’ incomes – but, for plenty of businesses, transitioning to this company structure marks a positive move forward.
Still, changing to a limited liability company is not always a smooth process, and prior planning and preparation are absolutely fundamental to your ability to realise the full benefits of making this change.
Here are a few things any business owner will want to know before they begin the transition.
Get Legal Advice Early On
You don’t want to rush into this process, or get all your information from generic, catch-all guides, launch into the process, and find yourself lost at sea a couple of weeks in. Consider speaking to a corporate solicitor as soon as possible, so that they can take the lead and guide you through what is, even in the best of circumstances, a complicated undertaking.
They will be better equipped to anticipate potential issues for your company, and make certain that you’re aware of any new obligations or regulations imposed on a limited liability company.
Decide on a name
Choosing a name for your business can be a head-scratcher, but, for obvious reasons, it’s very important. Company names need to comply with the Business Names Act, as there are certain prohibited words or words that require certain permissions. If the name hasn’t been taken by another business, and once you have registered the business’s name at Companies House, it will be made unavailable to other limited liability companies looking to register with Companies House.
Decide who will be involved with the business
All directors will need to be registered with Companies House. In the past, this meant that personal addresses became public knowledge – but, these days, it is possible to keep these personal details private.
Incorporate your company at Companies House
Registering the company requires a memorandum, as well as articles of association – two things your solicitor can take the lead on on your behalf. You will also need to file financial statements with the limited liability company going forward.
Tell HMRC about your change of legal structure
Yes, this is where those widely revered tax benefits offered by the limited liability company structure come into play. For this reason alone, it is vital you get in touch with HMRC as soon as possible.
Set up a bank account for the business
Under this structure, it is vital that your personal and business accounts are kept separate. Investors are only liable for the capital they invest into the business during its lifetime, so you’ll want to make certain that your personal finances are never ‘confused’ with your business’s assets.
Speak to your insurer
A change in legal structure means that you will need to revisit the types of insurance policy protecting your business. From public liability to a professional indemnity policy, your ability to reap the full benefits of transitioning to a limited liability company structure rests on your ability to secure the business’s interests, and protect it from potential pitfalls.
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