Before setting up a business, there’s a lot of things to think about. One of which, is whether to set it up as an Inc or Ltd & Co business. The type you choose won’t just affect your company’s image; it also determines the company’s success.
Not sure which one is right for your business? Well, as B2B expert Alex Croucher could tell us, the way you come across is almost as important as the set up you choose in order to operate. So let’s get it right. Below, we’ll look at the differences between the two and how each could affect your company.
What is an Inc business?
Inc, short for Incorporated Companies, are basically run by officers or directors who have purchased shares in the company. This means that if you’re the one setting up the business, you won’t actually be in charge of its operations. This makes it an ideal option for those looking to play more of a silent role who don’t want to be tied down by the responsibilities of running a company. It also means, if there’s a lawsuit filed against the company, your liability will be limited.
Incorporated companies are responsible for paying taxes on their earnings, as well as for paying its own debts. In terms of tax purposes, this type of business is best suited to larger corporations and businesses.
What is a Ltd & Co business?
Ltd stands for Limited Company, while Co stands for businesses in general. The latter has no real significance in terms of legal structure, it’s usually purely added for the way it sounds.
Ltd businesses are most prevalent within Canada and Europe. They are largely run by the individual founding the business, and shareholders and directors have little liability in terms of debts. You can actually set up a limited company in four different ways. The most popular, tends to be LLC, or Limited Liability Company. It can be run either by third-party managers, or by the members who own the business. The flexibility it provides is one of the main reasons it’s become so popular.
Setting up a Ltd company can be quite complex and there is a lot to consider. Therefore, it’s worth researching into each type of limited company option before determining which one is right for you.
Which one is right for your company?
There’s a lot to consider when it comes to choosing between Ltd and Inc business models. How much control do you want to have over the business and how will it affect your taxes? A good option is to seek advice from experts in the field such as RSM. They can help to assess your needs, particularly in relation to South African taxation.
Overall, deciding which type of company to set up is an important decision. You need to factor in how each type would ultimately affect you as a business owner, especially regarding tax responsibilities.
