Before you begin the process of starting a company, you must ensure you understand the different types of company structures available. Choosing the most suitable for your business type is crucial, which is why we’re here to help.
Here at Company Registrations Online, we have all the information you need on our blog to guarantee you have the details you need to make the right decisions. So, today, we’re looking into one of the company structures available to those starting a business, a private limited company. We’re exploring what this company structure means and delving into its pros and cons to help you make an informed decision on whether a private limited company is right for you and your business.
What Is a Limited Company?
A limited company, sometimes referred to as LC, is a company structure type with sub-structures under it, one of which is a private limited company. You will commonly see the abbreviation “Ltd.” at the end of a company’s official name if it is a limited company.
This company structure type limits the liability the company’s shareholders can undertake, for example, limited by shares or guaranteed. If the business is limited by shares, it means that it is legally separated from the people who run it, it has shareholders, or it can keep any profits after paying taxes, for example. If the business is limited by guarantee, it often means that it is a non-profit organisation and invests its profits back into the company.
As mentioned, there are different types of limited companies, such as public limited companies and private limited companies, the latter of which we are exploring today.
What Is a Private Limited Company?
Private limited companies are one of the most popular business structure types in the UK, ranging from single-person operations to huge corporations. As mentioned, they can be limited by shares or guarantees, meaning they could be a small family-run charity or a large business with millions in profit; the range is vast.
The ‘private’ in private limited company means that the business is privately-owned by either the company’s founders or its investors. Unlike a public limited company, shareholders must be invited by those who own the business in order to purchase shares, which gives much more control to the business owners.
Who Can Set Up a Private Limited Company?
As mentioned, a private limited company formation can be completed by any single person who will then act as the company director. However, certain people may be the perfect fit for this business type, for example:
- Those who want to remove their self-employed status and grow a business, allowing them to employ others
- Those who want to build their own brand and protect a company name
- Those who wish to attract private investors
- Self-employed people who want to improve their tax efficiency
- Self-employed people who want to sell their business in time
Advantages Of a Private Limited Company
Many advantages come with choosing a private limited company as opposed to a public limited company, or being self-employed, for example:
- Shareholders’ assets are protected should the company go into liquidation
- Company owners can claim corporation tax relief on their profits
- By opting for a private limited company, you get a professional image that you may not have as a self-employed person
- It’s much easier to raise capital as an owner of a private limited company as opposed to being self-employed, especially when attracting investors
- As private limited companies are one of, if not the most popular business structure in the UK, there are so many resources available to help you get the most out of your company
Disadvantages Of a Private Limited Company
Of course, like with everything, there are also downsides. These will differ from person to person and company to company, but generally, here are the most common disadvantages we hear from private limited company owners:
- Some claim that the setup of a private limited company is long, drawn-out, and expensive, but this is only the case if you choose an unreputable and unprofessional company formation service provider, unlike ourselves
- Managing your taxes as a private limited company may be complicated if this is not something you have done before
- Your information, such as your name, business address, and filing history, will be in the public domain
As mentioned, apart from the latter, these are personal opinions, and everyone will find the process of building their private limited company differently.
Setting Up a Private Limited Company With Company Registrations Online
Here at Company Registrations Online, we’re committed to making your company setup as smooth and straightforward as possible. We have almost three decades of industry experience, so we have perfected our services to provide only the best for our customers. As part of this, we offer specialist company registration packages, including everything you need to get your private limited company up and running correctly. So whether you need assistance with VAT registration, company secretarial services, or more, you can customise your package and create a bespoke service plan that best benefits your business.
Get in touch today to find out more and start your journey to becoming a registered private limited company.