What IS the difference? and does it matter?
In short – yes it does matter.
Its still quite surprising how many small businesses use phrases like ‘our company’ and ‘we’re in partnership’ and ‘MD’ when describing their business, or their roles in their business, often erroneously and potentially dangerously.
Lets get some things straight first.
A limited company is one registered at Companies House and which is owned and controlled by Directors and Shareholders. It has rights and responsibilities of its own – which are not the same as the rights and responsibilities of the Directors or Shareholders within it. A limited company is a separate legal ‘person’ ( that means it exists legally independent from any individual – even if there is only one shareholder/director) from its owners or controllers, and should have its own bank account, tax identity and be a party to its contracts. Sometimes Directors and Shareholders are one and the same but they don’t have to be . Not all companies have shares – some can be limited by guarantee. But for most companies its a leadership of directors and an ownership of shareholders – in very simple terms.
An unincorporated business can ether be a sole trader – a self employed person working alone – or sometimes two or a group of people working together – we’ll be looking at this in later blogs. Either way you should not refer to your business as a company, or you as a director of the company, if you are not an incorporated body.
Do you identify what your business is correctly? A limited company must state its full title and its company number on all its public correspondence – for example your website and your email footer, your Terms and Conditions, your contracts with your suppliers, your bank account – so that customers know who they are dealing with. You CANNOT use any name you want – there are some restrictions about what you can call your self so check what’s prohibited or restricted. If you have a trading name that needs to be stated as well. Here’s a helpful link if you need advice about this.
To get your FREE fact sheet on the difference between Limited Companies Partnerships and Sole Traders – just get in touch at firstname.lastname@example.org
with email header FACT SHEET and we will send that to you pronto. And we promise to be good to our GDPR word and not surreptitiously add you to a data base for future marketing…. cos that’s how we roll.
Next week…… some pros and cons……