All About Private Limited Company in UK

by | Jul 20, 2020 | Company Formations | 0 comments

Content

The majority of small startups in the UK choose to begin doing business as a private limited company. There are several reasons behind it. The first and most important reason being that operating as a private limited company UK. It has many advantages overworking as a sole trader or going in a partnership.

The owners of a private limited company UK are known as shareholders. The shareholders of a private limited company have each of their own number of shares in the business. The company is run by one or more directors who are also known as company owners.

What is a private limited company in the UK?

A private limited company in the UK is once which is a distinct legal entity separated from its owners or shareholders. In other words, the company in its own right is treated as an individual entity that has its own profits, liabilities, and business assets all belonging to the company itself. It also means that the owners, directors, or shareholders of a private limited company. They are not at all responsible personally for any debts that the company may incur.

Moreover, the owners or directors of a private limited company are considered as employees of the company. Therefore, even if the company faces problems with debts or enters into any legal disputes.

It is not the directors who are sued but only the company itself. Unlike in sole trading, in private limited companies, none of the director’s personal assets. This could be a home, car, family savings, etc. is at risk.   

Private limited liability company the UK

Limited liability is thought of as a specific legal status associated with company ownership. In which the financial liability of the company owners is limited to the fixed nominal sum. Sometimes, the value of their individual investments in that company. In case any legal dispute happens, the private limited liability company in the UK can be sued, but not its investors or owners.

The liability of a UK private limited company is restricted by the value of shares held by the shareholders of the company. The shareholders are not legally obliged to pay any of the company debts.

It is beyond the scope of the nominal value of the share that they hold. Even if the business fails at some point, none of the shareholders is legally obliged. They would risk their own personal assets (such as their savings or home).

Private limited company examples the UK

There are two kinds of the private limited company in the UK – one which is limited by shares and the other is limited by guarantee:

1. Private company limited by shares

It is not traded on a public stock exchange. In the case of company insolvency, the personal assets of the company’s shareholders. It will be protected if it is a private company limited by shares.

2. Private company limited by guarantee

A private company limited by guarantee does not have any shareholders or share capital. Instead, it is controlled by members. These are most often non-profit organizations that are run by a group of guarantors.

They also vote and pay money towards the company’s liabilities. The profit gained by a private company limited by guarantee may be divided between the members.

Some private limited company examples in the UK are local retailers. Such as restaurants and shops that do not have a national presence. To name a few of UK private limited company, there are Virgin Atlantic, John Lewis Partnership, Greenergy, B&M Retail, River Island, Anglian Water, and Brakes Group.

Advantages of a private limited company

Private limited liability company the UK not only has the benefit of limited liability, but it also has certain income advantages. There are significant tax benefits that a private limited company will get compared to sole traders. Then there are more tax-deductible costs and allowances that they can redeem against profit.

Next is there is legally no personal responsibility (in terms of finances) when you are the owner of a private limited company in the UK. You get to share the responsibility of running the company with other shareholders.

The name of your private limited company is protected by copyright and no other business will be able to use it. Therefore, a private limited company appears to be more transparent in trading compared to sole traders. It makes it more likely and easier to gain the trust of clients, customers, investors, and suppliers. As a result, it is easier to secure funding from investors and banks.

How to set up a private limited company in the UK?

To know how to set up your private limited company in the UK, the first thing to do is to choose a name that is unique. For that, it is recommended to check the existing trademarks to ensure yours is not already taken. Make sure to go through the rules to follow while choosing company names. Next thing is to choose a director, shareholders, or guarantors for your private limited company UK.

It is essential to prepare documents agreeing on how you will be running your corporation. These documents are called Articles of Association and Memorandum of Association. Decide on your official registered company address and a SIC code. Prepare your application form (Form IN01) for registering your company.

When your documents and application are ready. You need to submit them with all relevant information to the UK Companies House. Then you will be able to register your private limited company in the UK.

While registering with Companies House, you are usually automatically registered for Corporation Tax. If not, then register with HMRC for corporation tax.

Conclusion

The main purpose of this article was to give a clear idea of what is a private limited company in the UK. There may be more complex paperwork and official procedures involved. But there are several potential benefits to being a private limited company over being a sole trader. Most of the private limited company UK are small startups because there is mostly no minimum requirement for capital.

Hope this post is helpful for you!

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