Home > New Business Start Up > Business Structure > Limited Company

Limited Company

A limited company has a legal existence separate from management and its members (shareholders). The finances of the company are separate from the personal finances of the owners. Shareholders are not responsible for the companies debts unless of course they have given personal guarantees. However, they could lose the money they have invested in a company if it fails. The protection given by limited liability is perhaps the greatest advantage of a limited company.

The main types of company are:

  • Private Limited Companies can have one or more members but cannot offer shares direct to the public.
  • Public Limited Companies (PLC) must have at least two members and have issued shares to the public to the minimum value of £50,000 before it can trade.
  • There are also private unlimited companies and companies limited by guarantee. These are not common and are usually created for a specific reason.

If going for Limited Company status you need to choose the company name and register it with Companies House. There are many company registration agents available on the internet which will assist in setting up your company at a relatively modest cost. The alternative is to do it yourself through Companies House. A company must have at least one director (two if PLC’s) who may also be shareholders. Directors must be at least 16 years of age. PLC’s must also appoint a qualified company secretary. There is no requirement for a private company to appoint a company secretary.

Annual accounts must be filed with Companies House within the time allowed. Failure to do so will result in a late filing penalty. Accounts may require auditing though smaller companies may be exempt from audit. In addition, a company must file an annual return to Companies House which summaries key information about the company.

Profits made by a company are normally distributed to shareholders in the form of dividends. Some profit may be retained within the business to fund further growth or to finance working capital.

A company needs to register with HMRC and is liable to corporation tax. A company will need to make an annual return to HMRC. Company directors are treated as employees of the company and must pay both income tax and class 1 national insurance on their salaries.

Need to discuss your business in more detail?