Your decision to create a private limited company in the UK is a smart one. It’s not that hard, really; it just requires a little more of a grasp of the world of business. This is everything you need to know about an Ltd.
What does a private limited company mean?
An Ltd (private limited company) is different from its owner/owners. An absolute opposite of a sole trader and a partnership company. This means that all the business money is entirely separate from the shareholders. They will not suffer the same debt that the company will. They can only lose what they put into the shares, and whatever is left will be returned if the company gets shut down.
Who can set up a private limited company?
You will need to have at least one director that is at least 16 years old. The company also needs at least one shareholder; the director can also be the shareholder. You can hire a company secretary; it isn’t a required role. The process should be smooth sailing, so anyone or group that wants to establish a company does so successfully.
The advantages of a private limited company
The benefits of a legitimate private limited company are plentiful, and we suppose it comes from what the company ‘is.’ The first pro of any limited company is that the owner/owners have protected assets. A company cannot go bust; you will get rid of the company’s assets to pay the debts, but this will be all – the owners of the company are safe. Along with this, it will breed confidence and trust; shareholders, especially, will appreciate this. Along with that, of course, a company name with “Ltd” also looks much better than sole trader partnerships.
The disadvantages of a private limited company
The biggest disadvantage of running a private limited company is it’s complicated. There’s a lot more paperwork and bookkeeping to do. Ltd companies have to file all the proper documents, including all the accounts and confirmation statements, with Companies House.
If Ltd companies don’t follow the company guidance, they could lose their privilege to use this or even become struck off. This does, unfortunately, mean it is one of the (if not the) most expensive ways to run a company. Also, filing the documents and accounts with Companies House means that information will always be retained. This will then be shown on the public record, seen by anyone.
Documents required to set up a private limited company
Many supporting documents are needed to create a private limited company. The first couple of documents that will be essential are a Memorandum of Association, which holds details of the agreement between initial shareholders to start the company, and Articles of Association, which are documents with the details of the governing rules for the operations as well as what directors and stakeholders are supposed to do. Form IN01 holds details of the directors and company secretary, the limited company SIC code, and, if appropriate, share capital.
How to set up a private limited company
The first step is choosing a company name that no other company or business registers. Also, no offensive word should be part of the name. Incorporate with Companies House, which you can do digitally using their website, and it’s usually 24 hours.
You can also go by postal route using paper applications, and it takes around ten days after that. So, after applying, it’s time to get your documents ready. You have to know the documents required after applying for the business registration. Here are all the documents you need to register: Memorandum of Association, Articles of Association, and Form IN01.
File the documents and appoint the officers of the company. Register your company and decide who the people who will be running your business. You must register with HMRC within 3 months of hiring the first employee. Get a business bank account—use separate bank accounts for your business and personal expenses.
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FAQs
There might be some other general queries you have on how to run the company; we’ll answer the most asked questions here.
How long does it take to register a private limited company?
It all depends on if you’re doing it online or on paper applications. Doing online will take about 1 day. If you are doing the paper application, it may take 1 to 2 weeks. To get it done sooner, you can do it on the online.
What is the difference between a public and private limited company?
The truth is a Ltd cannot sell shares and offer them to the public. But a Plc can. It must have at least £50,000 worth of shares before it can trade.
Do private limited companies have limited liability?
A private limited company provides lots of tax benefits for the owner, e.g., the Corporation Tax rates are lower than the income tax. They can also claim back other expenses, such as travel, office equipment, employee wages, etc, to lower the company’s profits, which reduces the tax paid. It can essentially work out cheaper for the owner in the long run.
Can a private limited company be converted to a public limited company?
If the company does meet all the rules and regulations private limited companies need to meet to convert, such as increased share capital, re-registration as a PLC, etc., then yes. By selling their shares to the public, they can expand the possibilities and attract a huge capital investment.
What are the tax benefits of a private limited company?
A Private limited company can save tax. Corporation Tax, which is less compared with income tax personal pay, can pay out the money paid to directors as Salary, Travelling, Office expenses, Loans, tax benefits on phone bills, etc., and all these items reduce the Taxable Income of the company. This is a big advantage for the company to save in Taxes.
Can a private limited company operate internationally?
It can, but the company must follow the commercial and legal steps of each country they enter into trade with and the UK regulations. It also must be registered there and follow the commercial and jurisprudent laws.
