As we said earlier, the liabilities in a private ltd firm are lesser. This is primarily because of one main reason. In a sole trader or individual account, there is hardly any distinction between personal money and assets and those held in the name of the business account. Whereas in a private business the border line between private and business assets has been very well defined which makes it much easier to manage the financial accounts. Also, as per the Companies Act, when there are losses in the firm, if the directors of the business are held liable and not the share holders and the limited company is then declared insolvent.
The second main advantage of a private ltd company is that the taxes are much lower as compared to individual sole proprietorship. The ten thousand pound tax limit that was set decades ago has long been abolished and today. Also, while the sole proprietorship's basic tax rate has been reduced from twenty-two percent to twenty percent in the year 2008, the corporation's tax rate was increased by the same amount i.e. from twenty to twenty two percent. This may seem a small difference but when one calculates on a long-term basis this two percent is really big.
Also, in a limited corporation a lot of tax can be saved by distributing the income and profits as salaries and dividends to partners and share holding entities within the family run business. This is not possible in a sole proprietorship business or self employment. All in all, ltd business is much more profitable and safe option as compared to self employed proprietorship businesses.
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