207 - Why you should form a company

Business Legal Lifecycle Podcast

Today we just wanted to go through some of the benefits of setting up a company for your business. Separate legal entity This is a concept that a lot of people struggle to get their heads around. But once understood it, it's really a game changer A company is a separate legal entity from the people behind it. That means that if you get sued it protects the person people behind that company. It also means that the separate legal entity has a different tax regime. And it has a separate credit with credit reporting agencies. Directors A company has directors. You can have a number of directors depending on how your business is structured. The company is a separate legal entity, and directors are not personally liable in my instance, unless they sign a personal guarantee. This allows the directors to have asset protection for them personally. Shareholders The directors have control over the company but the shareholders actually own the company. So the benefit here is that people who own the company don't necessarily have to have any exposure to the outside world. Shareholders very rarely have any liability. So that's probably the main benefit. People who own the company are separated from the risk. If you're a sole trader, if something goes wrong, then liability rests with you as the owner of the business. So Greg, there are benefits of our company.