EUROPEAN PARLIAMENT OPENS DOOR TO INCORPORATED BUSINESS EXPLOSION?
Look up any website that lists the advantages and disadvantages of limited liability companies, and you’ll find near the top of any downside listing the fact that Ltd companies have to file their financial accounts at Companies house for the public to see. However, if the UK government follows the European Parliament lead taken on 10th March, it may be that hundreds of thousands of small incorporated businesses may be exempt from filing any financial details in the future. The European Parliament recently voted to exempt microbusinesses (under 10 employees, under 1 million euro turnover or 500, 000 Euro balance sheet total) from complying with the Fourth Directive. Yes you’ve got it…. if you’re a business with this profile, you can have limited liability without disclosing your financial position!!
If this ever became law in this country, and to be honest, my money is on the UK government backing the Europeans on this, I envisage a huge migration of partnerships and sole traders moving to register as private limited companies at Companies House. Where’s the downside? I can’t see one.
It does all seem more than a little daft however. During this credit crisis, all kinds of organisations have been calling for greater financial transparency in order to open doors to trade credit and finance which are so desperately needed by businesses to survive. At the same time, European governments are voting for far less financial transparency to save small businesses a few beans through the lifting of administrative burden. The European Commission loves the principle “Think Small First”. I agree with this, but what we seem to getting from politicians in Europe is “Think Narrow First”. Not quite the same thing.