can be signed by a solicitor engaged in the limited liability company formation or a person named as director or company secretary on form 10 under section 10 of the Companies Act 1985.

The Memorandum of Association sets out the objects and scope of the proposed limited liability company stating the company name with details of the subscribers to the Memorandum of Association witnessed.

Table A is a standard format of a set of Articles of Association, a statutory document that governs the internal affairs of the limited liability company and it is recommended that Table A, Articles of Association is adopted in its entirety.

Following a final check to ensure accuracy submit all 4 documents to Company House with the company registration fee and the company formation is complete.

Company Formation and Corporation Tax Advantages

Sole traders pay income tax while a limited liability company pays corporation tax which is a tax payable on the company net profit. The taxation advantages and disadvantages change from year to year as government policy in relation to tax rates and allowances change. Prior to 5 April 2006 there was a considerable tax advantage in a company formation as the first £10,000 of taxable profit made by a limited liability company was zero compared to being self employed where the normal tax allowance as an individual might be £4,895 and 8% national insurance contributions also being charged on net self employed profits.

The zero tax rate for the first £10,000 of limited liability company net profit was removed in the 2006 Budget leaving the corporation tax payable on net profits of £0 - £300,000 for small companies at 19%. The scale of the tax advantage in incorporation is dependent upon the level and expected level of net profit. Generally self employed businessman paying all his tax at the lower income rate of 22% would not gain a significant tax advantage, while anyone paying the personal tax rate of 40% would show significant tax advantages compared to the corporation tax rate of 19%.

Advantages of a Limited Liability Company

A sole trader receives no protection from the business liabilities should the business run into financial problems whereas the liability of the shareholders in a limited liability company is limited to the amount subscribed for that shareholding. Generally limited liability becomes less clear in reality. Banks and credit institutions often require directors of a small and newly formed limited liability company to provide personal guarantees against loans and credit.

In addition directors should be aware when starting a limited liability company that should that company run into financial difficulties and become insolvent the directors themselves may be financially liable for any debts incurred if the company continues to trade after the directors became aware the company was insolvent. This is why administrators of companies that go into liquidation often immediately cease trading to avoid themselves as administrators being held liable for any subsequent debts being incurred.

Article Source: http://www.articles-galore.com

Terry Cartwright, a Chartered Company Secretary, through DIY Accounting provide inexpensive company formation document packs and a company formation incorporation service at DIY Accounting Company Formation assisting many individuals through the company formation process.

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