Basic Facts about Different Company Structures

By: JessicaThomson

Did you know that an Umbrella Company only acts as an employer for contractors who are independent and work under a temporary contract that is availed through a special employment agency? Do you know what a LLC, PLC and a ULC really is?

Here is a brief explanation about different types of Companies and their structures and sub structures:

A Limited Company or a Limited Liability Company (LLC)

A limited Company (as called in UK) or a Limited Liability Company (as referred to in the USA) is a company whose "liability" (A situation under which a person's liability is limited to a fixed amount of money or investments.) is limited through shares.

The members of an LLC may be normal people, different corporations, partnerships and other LLCs

There are two subdivisions to the above structure:

Private Limited Company

This kind of company is not dependent upon share capital. Instead it is guaranteed by the members who have agreed to pay a set amount of money, in case of "liquidation".

Public Limited Company

Also referred to as a PLC, these companies depend a lot on share capital. Shares of nominal denominations of such companies can be publicly traded on stock exchange. The bid is open to everyone from common people to other organisations.

An Umbrella Company

As mentioned above, umbrella company behave as employers to autonomous contractors. Recruitments are done on contractual basis so as to reduce the liability of the company. Umbrella companies have become popular in the United Kingdom since the conception of the IR35 legislation (IR35 is a special tax legislation that is fabricated to impose tax on employees that work for umbrella companies. This is also known as "disguised employment" tax.).

For tax payments, all companies of this type use PAYE calculations to deduce the amount of tax that needs to be paid.

The internal operations of an Umbrella company such as tax calculations, management of expenses as well as calculation of contactors pay are beyond the scope of this article. You will need to go online and refer to specifics.

Managed Service Companies or MSCs

These companies are composite structures. The company may be jointly owned by individual contractors. However the contractors do not participate in its management. Unlike The "Umbrella" structure, a Managed Service Company pays dividends and considers whole income similar to employment income.

Managed service companies are regulated by the MSc legislation that came out with the "2007 budget for United kingdom". The introduction of this legislation led Umbrella's to gain even more prominence in the market.

Considering this fact, a number of contractors have started their own limited companies.

There are a number of other subdivisions as well. Extensive and up to date information is available over the internet.

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