Ask Fleximize: LLC

This week we're answering the pressing questions on the lips of everybody connected to a Limited Liability Company (LLC)

Is a Limited Liability setup the best option for me?

The type, size and structure of your business will likely dictate whether an LLC (limited liability company) or incorporation is the best option.

Corporations can more easily raise finance through issuing stock, transfer ownership interests, and have a strong business structure that makes it easy to obtain credit. However, there’s a lot more administration involved.

An LLC gives you the same limited liability protection of a corporation, with less administration, suiting a smaller business structure. An LLC is more useful for those with small start-up capital, who aren’t planning on hiring a large number of employees.

When starting from scratch, is it prudent to go straight to being a limited liability company?

There are several different business structures to choose from and which one’s best will depend on your particular circumstances. Your decision will have an impact on your tax, financial and legal responsibilities. The level of complexity and amount of paperwork involved are important factors to consider too.

Starting out as a sole trader or an ordinary partnership is certainly the easiest way to launch your business, as there’s no need to register with Companies House, tax filing is straightforward and you can withdraw money from your business easily. Setting up a limited liability company protects you from the financial liabilities of your business, but you will have to pay corporation tax and you’ll probably spend more on accountancy and legal fees.

What legal documents must I submit to withdraw as a shareholder of a limited liability company?

If you no longer wish to hold shares in a company, you will need to sell those shares. The only legal documents you need are your share certificates, if you were issued any.

For public limited companies, which can be freely traded on public exchanges, you may send your certificates to a trading broker who will sell them on your behalf. They will return the proceeds to you, minus any fee they may charge.

For private limited companies, your shares can’t be publicly traded so your options may be more limited. Depending on the company’s rules, the company itself or its other shareholders may be willing to buy your shares.