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Definition of Private Company Limited by Shares


The majority of private businesses registered in the United Kingdom is limited-by-shares corporations. One of the main advantages of this type of business structure is that it functions as a distinct legal entity from the individual owner.

Because a limited business is a different legal entity from its shareholders, the company is responsible for its own finances and obligations. In this way, the owner’s profit from "limited liability," which reduces their financial responsibility for the company's obligations.

Although many limited corporations are restricted by shares and owned by shareholders, others are restricted by guarantee and controlled by guarantors.



Ways to Form a Company Limited by Shares

It is not difficult to form a private corporation limited by shares. Furthermore, because a private corporation limited by shares has a restricted financial obligation, there is less danger in this choice. To guarantee that you incorporate a private company limited by shares appropriately, use the following as a guide:

        Any private business limited by shares must be registered with Companies House, and in order to get permission, it must have a distinctive business name.

        You must have a registered office address that serves as the official firm address, and it should be visible on public record. Note: This must be a complete physical address in the same nation as the company's registration address (not a PO Box Number).

        A private business limited by shares must have at least one director and one shareholder (minimum). A director and a shareholder might be the same person.

        Standard Industrial Classification (SIC) codes must be given in order to explain your company's operations. There are a total of four codes that can be submitted.

        The application must include information on a person of substantial control (PSC) in the firm. The PSCs are almost always the shareholders and directors.

        You must sign a Memorandum of Association, together with their desire to create the business and accept at least one share in order to record the names of the business's initial shareholders (known as subscribers).


What are the Filing Requirements of a Private Company Limited by Shares?

According to the Companies Act of 2006, a private company limited by shares must comply with a variety of filing procedures and financial reporting laws.

As opposed to a sole trader firm, a limited corporation has greater filing and accounting responsibilities. It is a legal necessity to submit a Confirmation Statement along with statutory financial accounts to Companies House on a yearly basis. Annual statutory accounts summarize your company's financial activity over the course of a year, including sales, expenditures, assets, and liabilities.

If your firm is trading, you must submit company tax returns and full financial statements with HMRC, as well as pay corporation tax on all taxable earnings (20 percent). If your yearly turnover reaches the current level of £85,000, you may be required to pay VAT. Some businesses intentionally register for VAT in order to project a professional image to clients and suppliers.


Advantages of Forming a Private Company Limited by Shares

Many entrepreneurs value the legitimacy of a limited company and a "proper" corporate organization in addition to the following benefits:

        Limited liability businesses are independent legal entities from their owners.

        A limited corporation has limited liability, which implies that shareholders'/guarantors' personal finances/assets are safeguarded in addition to their agreed-upon investment.

        Limited liabilities provide the impression of professionalism and trustworthiness.

        Despite the fact that a limited business may be run by a single person, and it is always viewed as a larger and more established firm.

        Raising funds from lenders/investors are frequently easier with a limited company.




In a nutshell, there are several benefits to creating a private company limited by shares, and as long as you understand the filing requirements for a limited company, you'll be well prepared to file those crucial and necessary paperwork on time.



This blog was written by Ibrahim Imran for Future Formations Limited. 2021