What is a Limited Company?
Posted on 29th December 2020 at 17:08
A limited company is a legal entity in its own right which is set up and sits behind the name of a business. Having 'limited liability' status means you will not be personally liable for any financial losses made by the business which do not have any personal guarantees. This is not the case for sole traders and partnerships where the owners are personally liable for all the business debts. Also a limited company’s tax and legal liabilities become separated from the owners’.
There are two main types of limited company a Private Limited Company by Shares (LTD) and a Public Limited Company (PLC). This means that each shareholder’s responsibility for financial liability is limited by the value of the shares that they own but have not paid for.
There are various advantages of operating a business through a limited company. Some of these advantages include:
1. Limited liability is one of the main advantages of the limited company set-up as shareholders are only legally responsible to the extent of their original investment, and can only lose the capital they initially put into the business.
2. As a limited company is a distinct entity from its owners, it may be a little easier for a company to raise business loans and investments.
3. A limited company may benefit from tax advantages such as car ownership, dividends and pensions to name but a few. It would be advisable to go through a specialist professional such as an accountant or financial advisor who can advise you of how best and explain the rules and regulations.
4. A limited company also protects your trading name as once registered the business name cannot be used by anyone else and another company cannot be legally registered with the same name.
5. The company will exist beyond the life of its shareholders and management. If they retire or resign, the company will continue to exist and operate, which ensures security for employees. If the directors are the main shareholders, business decisions can be made quickly and easily, allowing for a successful business strategy.
6. The legal seat/ registered office does not have to be the trading address. The company can use a service address such as the accountant or formation agent’s address.
7. Directors do not have to publicly show their private addresses but will need to register a service address and again this is usually the accountants address of company formation agent’s address.
How to form a limited company:
a. Firstly choose a company name and check with Companies House that this name is available and has no sensitive words preventing it from being accepted. There are a number of sensitive words including “trust”, “association” and “royal”. Including these words in the company title will most probably mean the application to form the company will be rejected by Companies House. There are sensitive words that can be accepted providing they have supporting documentation to explain why the word is required. Further details it is recommended you seek the advice of Companies House or a formation agent.
b. Once an accepted name has been chosen it will then need to be registered with Companies House. This can be via an online service directly to Companies House or via a professional business such as an accountant or company formation agent who will provide this service for a fee.
c. Upon registration the HMRC will need to be informed when the company commences trading. You must apply for VAT registration if you envisage the turnover of the business to be greater than £83,000. These responsibilities are that of the company’s director(s).
d. Following the formation of a limited company there is a legal requirement to submit statutory documents on an annual basis such as accounts and confirmation statements. There are different annual account requirements depending on the size of the business from Micro accounts to Full accounts. Even if the company is not trading dormant accounts have to be filed.
Here at CCS Nationwide ltd we provide company formations services for both resident and non-resident clients. For further details of our company formation services and packages please visit our company formations page, email firstname.lastname@example.org Or call (+44) 0121 449 3045.
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