Why Form Scottish companies

Why Register a Scottish Limited Liability Company?

General Advantages of Scottish Limited Liability Companies

The decision to purchase a Scottish limited company and take on the responsibilities of being a director and/or secretary will probably be one of the most important of your business life. At law, there is no legislative difference between an English and a Scottish limited company (both being governed by the Companies Acts’ 1985-1989) but the Scottish courts are independent from those in England and generally are more stringent in their interpretation than South of the Border. Before proceeding, all clients should be aware of the advantages and disadvantages of a limited company compared to either a sole proprietorship or partnership. Generally in running a company there is a little more bureaucracy but this is generally more than compensated by the protection afforded to personal assets. In addition, in the UK corporate tax levels and payment periods, especially for small companies, are often more favorable than those enjoyed by individuals. If and when the decision is made to proceed with a domestic company In A Minute Company Formations can offer a full range of professional services at very competitive rates both for members of the general and professional communities. We have put together a guide of the different types of Company.

Use this guide to decide what sort of legal entity is most relevant to your needs

Sole Proprietorship

This is the most simple of all legal mechanisms and may provide the ideal conduit for the small businessman. Certainly, it is not encumbered with the legalistic formalities of other business organizations and the owner does have complete control to hire, fire, enter into agreements or even cease to trade however and whenever he so pleases. Unfortunately, this complete control and simplicity is tempered by the simple fact that there is no legal distinction between the actual business and the owner. In other words, any liabilities, debts or charges for which the business is liable, you are also personally liable.

Advantages:

1. Owner has complete control over all business affairs

2. Simple to administer and operate

3. Long established business mechanism

Disadvantages:

1. No distinction between personal and business entities and therefore, no protection for one's own personal assets. There is no tax distinction between personal and business income, often leading to an inefficient use of potential tax savings

2. A Sole Proprietor is directly liable for the actions of his employees

3. Action taken by creditors is often quicker against an individual than against a corporate entity

4. The physical movement of the entity will always correlate with the physical movement of the owner. Generally, most tax benefits are, particularly where 'foreign' transactions are involved, accrued from distinguishing between a person and his business

5. Save where the individual's reputation is established such entities are not considered as 'reputable' despite the increased exposure.

The Partnership

By definition a Partnership is the coming together of two or more individuals for their common good. Like the 'Sole Proprietorship', the Partnership is almost totally exposed to third party actions. Legally, a Partnership can often be formed with no written agreement; however, one would be ill advised not to set-out the rights and obligations of the partners. Unlike in England and Wales, a Scottish partnership can enter into an agreement in its own name and need not be exclusively reliant on names of the partners.

If no such agreement is in existence, standard legal interpretations will generally be imposed unless there is clear evidence that the partners are subject to their own set of criteria, which would be the case for those belonging to a professional institution such as the Law Society.

One point that should always be borne in mind is that in the case of economic difficulties each partner will be liable not only for his shareholding but for all partnership debts which means that any person with assets should be very careful before going into business with a less well off counterpart as whilst the gains will be equal the potential losses will not! Advantages:1. It brings together two or more people who have a personal interest in the welfare of the business


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