Private Limited Companies - Limited by shares
The most popular types of incorporated companies in the UK are private limited companies. The key reason being that requirements for setting up a private limited company are simple and it is quick to set up. To incorporate private limited company there are no restrictions of capital amount or the number of employees working for you.
In fact, many of the private companies formed in the UK are very small, with an initial share capital of less than £100. Filling requirements with Companies house for Small and medium sized (SME) businesses are simple. A detailed full accounts submission is not required instead they are allowed to submit simplified accounts referred to as Filleted Accounts to the Companies House. Forming limited company is very useful for sole traders to save yourself against any claims on personal assets when working within unstable and ever-changing economic climate. It means if company is in loss, company will be responsible for its debts and trading losses rather than the individual. The individual person’s personal assets will remain safe and their liability will be limited to the share capital amount of the company which can be below £100. Operating as a sole trader is risky and means if your business fails you are personally liable to pay business creditors and borrowings, and this will not be covered by your insurance. On other hand if you set up private limited company, your company will be responsible for business borrowings and creditors. Instead of you and your personal assets will remain protected. Registered as private limited company can also save tax, company liable to pay corporation tax at single rate of 19%, whereas a sole trader on higher rate of tax will pay tax at 40% when earning between £50,271 to £150,000 (2021/22). Same tax applies to partners in a Partnership.
The benefits are not just for SMEs:
The benefits are not only for sole traders and small and medium size business to form limited company, but large firms can also benefit from this. Incorporation is the only way to protect your company name against someone else registering it. A simple way to protect your trading name from someone else. If you are worried that you must start trading after incorporation. Not to worry – company can remain dormant if you want, however you must file the annual accounts for the company in a simplified form. This is not complicated and you can keep your company name protected/reserved. If you register private limited company, you are not allowed to sell shares to the public. But in future if you feel your business is growing and you need more funding through investment, there is an option to convert your company from private limited to public limited. This will allow you to trade company shares on stock exchange.
Company Filling deadline and Minimum directors’ requirementshe benefits are not just for SMEs:
You must maintain accurate bookkeeping and accounts records; your company financial statements must be submitted annually to Authorities within 9 months of the financial year end. Minimum One director must be appointed in a private limited company. You are allowed to have directors from other corporate bodies, but a minimum of one director must be a physical named person (an Individual).
Key advantages of a Private Limited Company
No minimum capital is required to form a Private Limited Company.
Separate legal entity, a private limited company enables you to keep your company finances separate from your own personal finances.
Limited Liability: Your personal assets will be safe if business fail. Your liability as a shareholder is limited to the amount unpaid of the shares held by you.
Forming a company will build business creditability. This makes it easier to secure finance for your business with minimal level of personal risk.
Boosting customer confidence: Your business will be perceived as more professional and reputable, so building trust with your customers and commercial partners.
Indefinite lifespan: Private limited companies do not cease trading if a director or shareholder dies.
Lower rate of tax liabilities: As a private limited company you can avail tax benefits.
Low-cost way of protecting a business name.
Requirement of the company formation:
For your company formation we require your company name, registered office address, director and a shareholder holding at least one share. Select name carefully otherwise it can be denied by companies’ house if your company name is considered as offensive in nature, or indicates you have a connection with a government body or public authority where none exists. A proposed name can also be rejected if someone else is already registered with the same name. We recommend not use a name that is supposed to be intentionally misleading, or uses confusing signs, symbols or punctuation. Your company registered office must be in the country of incorporation, i.e., England, Wales or Scotland. Your business letterheads, paperwork and company website should include your registered address, as well as any other correspondence or trading address.