A Private Limited Company by Shares (Ltd) is a kind of Private Limited Company. This class of Private Limited Company is particularly popular because this company type stands as a separate legal entity distinct from its members such as directors, promoters, and shareholders. If the company is faced with a financial crisis or an insolvency scenario, the owners have limited financial liability. The owner’s liability is restricted to the capital they originally invested in the Private Company Limited by Shares. The Owner’s personal assets stand protected.

Company Formation

While Incorporation of a Private Company Limited by Shares in the UK, you need to know about a few key factors. Some of the significant points are as follows.

  • Every Private Company Limed by Shares should be legally registered with the official Registrar of Companies in the UK
  • Your company must have a unique name and a registered office address to obtain approval from the Companies House in the UK. The registered address is the address that appears on the public record. The registered address should mandatorily be a physical address that is present in the same country in which the company is being registered.
  • To incorporate the company, you need the company’s Articles of Association(AOA) and Memorandum of Association (MOA) also known just as the Memorandum needs to be filed with the Registrar of Companies. These two documents form the constitution of the company defining all rules and regulations for the company and its members.
  • In the UK you will need a minimum of one director and one shareholder to incorporate this type of a company. However, a single person can be both.
  • When applying for the company’s incorporation details of PSCs-People with significant control should mandatorily be included. Usually, these PSCs are the companies directors and shareholders.
  • Standard Industrial Classification Codes that explain your company’s business activities need to be included in your application.

Advantages

  • Limited liability: The personal finances and assets of the shareholders are protected, and their financial liability is limited up to the value of their shares
  • Tax effective structure: A Private Company Limited by Shares permits strategic financial planning in terms of tax. Shareholders can distribute profits in the form of dividends, and salaries. This can make it a tax effective structure.
  • Separate legal entity: A Private Company Limited by Shares is deemed to be a separate legal entity. This means that it will continue to exist and operate even when they retire or die. And it implies that there is security for employees and other members.
  • Name registration: Once you register a company name, it cannot be used by other limited companies or LLPs. After the name registration of your company, nobody else can register a company with your company’s name or a name similar to that of your company.
  • Ownership: The ownership of a Private Company Limited by shares can be transferred or passed on. In the event of the death of an owner, the separate legal entity status of the company lets the ownership is passed on to the legal heir.
  • Company’s owner status: A Private Company Limited by Shares can be a director or a shareholder of a limited company provided that it has at least one natural human director.
  • Perception: The incorporated status of a Private Company Limited by Shares enhances your business profile and business image. It makes the company highly appealing to potential investors and clients because it is perceived as a well-established well organized and reputed business.
  • Raising Capital: To facilitate business growth and increase the additional capital, you can sell its shares anytime.

Disadvantages

Some of the disadvantages of incorporating a Private Company Limited by Shares are as follows:

  • The AOA, of a Private Company Limited by Shares, restricts the share transferability.
  • A Private Company Limited by Shares is needed to file its corporate and personal information to be published in public record.
  • If any changes are made to your company details, the Companies House must be immediately notified regarding the same.
  • The Annual Accounts and the Confirmation Statement should mandatorily be filed with the Companies House each year.
  • Procedures for withdrawing money from the business are very strict.
  • The accounting requirements are complex cumbersome and time-consuming.
  • The cost of setting up a Private Company Limited by Shares is pretty high.

Summary

Hopefully, this article has been helpful in providing detailed ground information about a Private Company Limited by share and has answered a lot of your questions. You should also have a look at the Private Limited by Guarantee and the Public Limited Company.