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Advantages of a Private Limited Company

Advantages of a Private Limited Company

Are you unsure which legal structure you should use to start your business? Read this to see the benefits of registering as a Private Limited Company.

20th June 2019

Are you in a limbo deciding what business structure to start your business under? Deciding on the most suitable choice can be time-consuming and take you away from running your business. To choose wisely, you need to think about protection of your assets, tax, annual costs and the impression of your business’s stakeholders.

In this article, we’ll walk you through the main benefits of registering your business as a private limited company. 

Limited liability

A major advantage is that you will be personally protected from liability. This means that if you take out a loan, creditors will only ever access your business’s assets. Therefore, if your company ever gets dissolved, your personal property will not be impacted. You must remember, however, that this is the general rule. The assumption is that you have acted honestly and did not use your personal assets as a guarantee for the company. If you’re unsure of whether you should provide a guarantee for your new business, it is worth chatting to a business lawyer to weigh up your options.

Consumer impression

Your business will have a ‘pty ltd’ at the end of its name. Although this will come at a yearly cost, it will play a significant role in your customer retention. This is mainly because it makes your business look bigger and legitimised. Consequently, it suggests that your business is more established, and therefore a more reliable source. With these six letters, your business can be earning a lot more money than it would otherwise.

Tax benefits

Registering as a company will guarantee you a flat tax rate of 27.5%. This is contrary to a sole trader business which can be as high as 45%. The good news is that Australian Tax Office says that by 2021-22 this tax will be reduced to 25%. In turn, you will have more resources to focus on other components of your business, such as marketing.

Investment opportunities

A ‘pty ltd’ company is also favourable in the eyes of private investors. From their point of view, having a business enrolled as a private limited company protects them from any personal expenses. This is often seen as a deal-breaker. You must be conscious of your investors’ perception. This is because they give you the capital needed for your expansion. Remember, expansion means that you can maximise your brand awareness. This is what you need to be thinking about as part of your trajectory as it will increase your profit margins.

Transfer of business ownership

Since the company is a separate entity, your business will have the potential of living indefinitely. This means that if you choose to retire or start another business, your legacy can be carried on by another director.

Set up your Company

If you are ready to set up your company then we are here to help. We can register your Australian Company Number (ACN). Setting up a company doesn’t have to be a difficult process, in fact, you can have all the benefits above in minutes.

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Author
Youstina Armanyous

Youstina is an intern at Lawpath as part of the Content Team. She is a final year Law and Social Science student (majoring in development and culture) at Macquarie University. She is interested in legal technology and policy development.