Traditionally, professional practices such as solicitors, architects and accountants, were constrained in the structure of their business to operate only as a partnership. In recent years, however, the opportunity has arisen for professional practices to incorporate as a limited company or a Limited Liability Partnership (LLP), and enjoy the advantages these structures provide.
So what are the key reasons why you should consider incorporating your practice?
Incorporation means your practice can make the most of a malleable and dynamic structure that will give your practice an edge in an increasingly competitive market. It will provide your practice with its own legal identity so it can make contracts and hold property in its own name and provide a better shape for potential growth.
The clear capital structure of a limited company may enable your practice to access external investment which could serve to drive further expansion and free up revenue within the practice for you to invest in growth. Careful consideration should be given as to the choice of limited company or LLP to make profit extraction from the practice as efficient as possible.
The limited liability conferred by a company or LLP will protect the directors/members if the practice should fall into difficulties. Your personal assets would be protected and liability would be limited to the amount of any unpaid share capital or, in the case of a company limited by guarantee or a LLP, the amount agreed to be contributed by each member.
4) Public Image
Incorporation would make it easier for your practice to create a corporate brand. Additionally, public disclosure of financial and other information means, suppliers and customers may feel more comfortable and confident in trusting a limited company or LLP.
The incorporation process is relatively quick and easy and will typically be completed within 24 hours. If incorporating an existing practice, you would need to sign an agreement to transfer the existing business and assets to the new company or LLP. In the case of a limited company, it’s also usual to enter into a shareholders’ agreement with the other shareholders. The practice premises would also need to be transferred, depending on whether they are owned or leased.
There may be restrictions on what words or phrases can be used in the registered name. Practices such as veterinary surgeons and architects must apply for permission to the relevant body to use phrases such as ‘veterinary surgeon’ or ‘architects’ within their corporate name. In addition, the practice’s regulating body will often impose restrictions or requirements on what the articles of association or LLP agreement should contain. For dental surgeries, for example, there are specific regulations as to the proportion of the directors’ board that must be made up of registered dentists or dental care professionals. Our formation team are happy to advise on the specific requirements that apply to different professions.
If you have any queries about incorporating your practice, or just want to know more, get in touch with our formations team.