limited liability
As the name implies, the owners of a limited company, that is, shareholders, bear limited liability for debts. Just like the limited partners in a partnership, when the liquidation fails, the shareholders only lose their investment in the enterprise. Even if the company is insolvent, shareholders do not have to repay the company's debts with personal property.
Infinite life
Unlike sole proprietorship or partnership, a limited company can exist indefinitely. Because a limited company is an independent legal person, its existence will not be affected by changes in shareholders. If shareholders quit, they only need to transfer their shares to others.
growth potential
Because limited companies can usually raise more funds than sole proprietorships and partnerships, their growth potential is also great. Companies can usually raise a lot of money by selling stocks.
tax preference
Generally speaking, the business form of a limited company can provide operators with more ways to reduce tax burden. In daily life, operators have a large number of private expenses, such as travel expenses abroad, rental housing expenses, etc., which can be used as operating expenses of limited companies, thus reducing the taxable profits and tax burden of the company. If it is operated in the form of sole proprietorship or partnership, such expenses generally cannot be accounted as operating expenses.
Shortcomings of limited liability companies
The tax rate is slightly higher
At present, limited companies need to pay 65,438+07.5% of the profits tax for all their net profits, which is higher than the 65,438+05% paid by wholly-owned companies.
Government restrictions
Limited companies are subject to more legal restrictions than sole proprietorships and partnerships; For example, a limited company must submit an annual return to the government, hire an accountant to examine the annual financial statements, sell its shares under the management of the government, and abide by relevant laws and regulations when merging enterprises.
Higher maintenance costs
The cost of maintaining a limited company is higher than that of a wholly-owned company and a partnership company, because the limited company has to hire an accountant to audit the annual financial statements and submit the annual statements, while the other two companies have no such expenses.
In addition, because the limited company is an independent legal person, the company's accounts must be handled independently, and the requirements for tax declaration are also higher. Therefore, operators must hire professional accountants to handle accounts, so the maintenance cost is very high.
Complex registration procedures
A limited company must register with the Companies Registry before registering with the Business Registration Office. These procedures are quite complicated, and most people need to hire professionals to handle them.