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Private Limited Companies

Find out what you need to know about forming a UK company

What are Private Limited Companies?

In the UK, private limited companies are the most popular incorporated companies. If you want to form one, they can be formed online with our web-based formation services. For example, one offered by ZDK Formations. If you need some directions, you can talk to our team of company formation executives at 0800 970 8727. Our experts will be happy to assist you and will explain the whole procedure to you step-by-step.

To form a private limited company in the UK, there is no minimum capital required and no need to have a great number of employees to work for you. Many private limited companies set up in the UK are quite small and the initial share capital requirement is less than £100. All small and large-sized companies with a simplified setup can file customized accounts at Companies House rather than full accounts.

Ideal set-up for Sole Traders

In the present time, maximum sole traders are switching towards forming private limited companies to protect themselves against trading losses while working in an ever-changing or unstable economic environment. It means that company is itself responsible for all trading losses and debts rather than an individual person. And, the assets of that particular individual will be protected from creditors and their liability will be limited to their shares if not paid up.

In another case, operating a business as a sole trader means that the person is legally responsible for all business borrowings to all creditors, if the business fails. The person can also be liable for claims which are not covered by the insurance. This can be really very costly if a business fails.

But, if you start a business as a private limited company, then the company will offset its losses and debts against other incomes instead of your income. And your personal assets will remain safe and protected.

As a private limited company, the business profits are subject to corporation tax, at a flat rate which is currently 20%. This tax rate is far better than the higher tax rate paid by an individual, conducting the business as a sole trader or through a partnership. The fixed tax rate is up to 40% when earning from £32,000 to £150,000 (2016/17).

Is it just for SMEs only?

There are for sure advantages of forming a private limited company for the sole trader or small and medium sized businesses. Also, it is benefiting to large firms. Like, small businesses, big companies are also taking part in it. This is the only way to protect a company name against registration by another person. It is also cheap and simple and will help you beat the competition created by new prestigious company names.

Once registered, the company can remain dormant and need not commence trading until it is ready. But you still need to file its annual report. The report can be in simplified form just to keep it simple and easy to deal with.

As a private limited company, you are not permitted to sell your shares to the public. If a private company gets to the stage where it needs significant investment to grow then it has the option to convert into a Public Limited Company. And, this will enable it to provide shares to the public and potentially have its shares traded on a Stock Exchange.

What are the advantages of a Private Limited Company?

  • A private limited company is a legal entity in its own right and protects your personal finances by keeping them separate from your company finances.
  • Protection from the personal liability: Your personal assets will not be at risk in the event of failure of the business. The liability of shareholders is limited to the amount, if any, unpaid on the shares held by them.
  • Forming a limited company can add credibility to your business. It can make it easy for you to borrow money, raise capital, and reach financing with limited personal risks for your business.
  • Build a sense of confidence in customers and suppliers: Building trust with your business partners and clients make your business look more reputed and professional.
  • Unlimited lifetime: The existence of private limited companies does not stop with the death of a shareholder or director.
  • Lower rate of tax liabilities: Running a business as a private limited company can make you earn some added tax benefits.
  • The Private Limited Company structure is suitable for profit or non-profit making entities.
  • There is no obligation for a private limited company to commence trading after its incorporation until its ready. This means, the formation of a limited company is a simple and cost-effective method to protect a business name.
  • Private limited companies have a foundation to guide the directors and shareholders, and regulate their relationship with the company and each other.

What you need to have to run a Private Limited Company?

Company accounts: To maintain accurate records for book-keeping and accounts, you need to have a set of company accounts. The financial statement in the prescribed form must be submitted within 9 months to HMRC, within your company’s financial year-end.

There is no doubt that every private limited company can have at least one director. And currently, a company is allowed to have other corporate bodies as its directors. But at least one director must be a dedicated/natural person. While a company secretary is no longer mandatory.

What do I need to give to ZDK Formations?

To form your business officially as a private limited company, your company name is a must which we require the most. When you form a company online with us, we don’t need any kind of documents. Although as a limited company, you need to have a shareholder holding at least one share, a director, and also the registered office address.

While deciding a name for your company, you have to keep certain things in your mind. For example, if your company name does not read pleasant in nature, Companies House can decline to register your company. The same can be happen in the case when you imply that you have a great bond with the public authority or government body where no-one exists actually.

 The name of your company can be also rejected if it matches with the name of another registered company already present the index of company list. Don’t use misleading names for your company. Also, ignore complicated signs, punctuation, or symbols.

The registered office of your company should be in the registered country, i.e. Wales or Scotland and England or Wales. This registered address and other correspondence address should also be on the paperwork, letterheads, and website of the company.

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