As
discussed in "How to get a guaranteed income
of $100,000
per year", you can get a lot of
operating
capital by forming a Public Limited
Company
and issuing shares to raise money.
You
can issue shares to third parties, and also
give
yourself as many shares as you like. As per
the
example in the above mentioned guide, if you
issued
yourself with 300,000 ordinary shares
which
eventually obtained a market price of $4
per
share, you would be worth $1,200,00 on paper.
One
of the many advantages of forming a limited
company
is that the company is recognised as a
separate
trading entity to it's owners and
liabilities
created by the company need not be
underwritten
by the personal wealth of the
owners.
We
must point out, though, that an ordinary
limited
company cannot sell shares to the general
public:
to do so would require it to "go public",
that
is, to become a public limited company.
Small
and newer limited companies may have
difficulty
obtaining a full stock market listing,
but
they may take up the option of becoming
public
without a full stock market listing. This
method
is called joining the Unlisted Securities
Market.
The
Unlisted Securities Market allows your
company
to go public whilst only making as little
as
10% of the capital available to shareholders.
The
five years of records that are required to
become
fully listed on the Stock Exchange are
also
not needed, and the advertising requirements
are
also much less.
If
you operate as a sole trader or as a partner,
you
and your partners, where applicable, are
personally
responsible for all the debts and
other
liabilities of your business. If your
business
was to fail with large debts, you could
end
up having personal property taken from you bu
Court
Order, even loosing your home if it were
required
to satisfy large debts.
With
partnerships, partners are jointly and
severally
liable, so each of you is responsible
for
any of the debts created by any of the other
partners.
This could to lead to problems where a
partner
incurs debts of which the other partners
are
not aware. It is possible for a partner to
run
off with the assets and leaving the remaining
partner(s)
to suffer the consequences. If trade
as
a limited liability company you will not face
these
dangers.
A
limited liability company can do business in
the
same way as a sole trader or partnership, but
has
certain advantages: if you have to go into
liquidation
you do not have to pay any of the
debts
of the company from your own pocket. The
only
liabilities which you can be held
responsible
for are back taxes.
By
raising capital by the sale of stock,
thousands
of pounds in bank interest charges can
be
saved by not raising the cash from a bank.
Sole
traders or partnerships do not have this
advantage.
Other
advantages of the limited company lie in
the
tax field: Taxes paid by the individual
directly
to The Department of Social Services can
be
put into pension funds, and should you face
company
bankruptcy, you can write off up to
$50,000
on a tax return, but not face any
personal
damage done to your credit rating.
In
the U.K., you can employ a company formation
agency
to set up your limited company. These
formation
agencies advertise in the quality daily
papers,
Exchange & Mart and the Yellow Pages.
Lists
of agencies are also available from
Companies
House, Crown Way, Maindy, Cardiff, CF4
3UZ,
Tel: 01222 388588, for England and Wales;
Companies
Registration Office, 100-102 George St,
Edinburgh,
EH2 3DJ, Tel: 0131 225 5774 for
Scotland,
and the Companies Registry, IDB House,
64
Chichester St, Belfast, BT1 4JX, Tel: 01232
234488
in Northern Ireland.
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