What is a Limited Company?
A limited company is a business entity established by shareholders investing capital. Although the investment is made by the shareholders, it is a separate entity from the shareholders.
That’s why it is called a limited company. The rights of shareholders are limited to the capital they have employed.
Technically we say that a limited company is a separate legal entity from its owners. Directors are appointed by the shareholders to manage and carry on the affairs of the company. In the case of a small business, the shareholders are the directors themselves.
Limited Company Types In the UK
1- A private limited company
2- A public limited company
3- Limited private company by guarantee
1- What is a private limited company in the UK?
A private limited company is owned privately and does not trade its shares publicly on the stock exchange. The maximum number of shareholders is 50 in the private limited company.
2- What is a public limited company in the UK?
A public limited company is managed by a number of directors and several shareholders are the owners of the company. The company offered its shares to the public and is named as a public limited company.
3- What is a Limited Private Company By Guarantee?
A charitable organisation or company is known as a limited private company by guarantee. Non for profit companies are limited by guarantee.
What is SIC? Why is it important to an organization?
This code called the Standard Industrial Classification, or SIC is a method used by the Companies House to classify industries.
In starting a new company, the SIC code is very important as it suits its business activities. This is especially important when registering your company for VAT.
Important roles
There are mainly three positions that need to be designated for a private limited company setup in the UK. They are who are the shareholders, directors, and company secretaries. Company Secretary is optional.
The director of the company can also hold the post of secretary. Shareholders are the owners of the company and directors run the business. You should know that only the company’s shareholders are entitled to dividends.
How to open a business bank account?
As the owners of a limited company and the company are separate legal entities, your personal bank account cannot be used for company transactions. A separate business bank account should be opened for that.
For that, the registration documents of the limited company should be given to the bank. It usually takes you at least 10 working days. But that time also depends on the bank.
Need an accountant?
A limited company is not legally required to have an accountant. But consider whether to hire an accountant based on your company’s revenue and complexity. You can benefit from appointing an accountant who has knowledge and experience in your business sector.
For example, your attention can be fully devoted to business activities, financial statements can be prepared according to the accounting framework, they have up-to-date knowledge of tax laws and inform you about tax deduction methods, they file the returns in timely manner, financial statements can be prepared for any period required (according to the requirements of bank for the loan purposes) and so on.
Should a business start trading immediately after incorporation?
It is not necessary to carry out business activities immediately after the incorporation of a company. You can register a business to secure a business name. The company can remain dormant. But you must submit accounts. You can get help from HMRC on how to do this.
What is a trading address and registered office address?
Two addresses must be provided for private limited company setup in the UK. That is the company’s registered address and trading address. If you run an online business from home, your trading address is the same as your home address.
If your business is a manufacturing company, then the factory location is the trading address. You should remember to use the trading address when issuing invoices or exchange correspondence with clients. Government agencies send legal documents to the registered address.
How to Protect Your Business Name?
It’s a common misconception that your company name is protected only by registering a business. By forming a company, your business name cannot be used by someone else for their business.
But someone else can use it for some marketing or other purpose. If you can, register your business name as a trademark so that no one else can use it.
Documents to be submitted for a private limited company setup.
The following documents should be filled and sent to the Companies House to complete the incorporation procedure.
Memorandum of Association
Form 10
Form 12
Articles of Association
