What is a UK private limited company?

A private limited company is a popular type of business structure in the UK. Here we explain what a limited company is, and how to register one.

Private limited company – what does this term mean?

There are several ways to describe the same thing:

  • Private limited company
  • Limited company
  • Ltd company

It is the second most popular way to run a business in the UK, after operating as a sole trader (self employed).

Key features

  • The term ‘limited’ applies to the ‘limited liability’ that company owners have should the company be unable to pay its debts. The financial assets of members is protected (unless is cases of fraud). Find out more in our guide to limited liability.
  • A private limited company is a separate legal entity from its owners, unlike the sole trader route.
  • The ‘Articles of Association‘ act as a rule book for a company. Most new companies use template ‘model’ articles, although you can create tailored articles depending on the requirements of the business.
  • All companies have a number of statutory and financial obligations which must be carried out by its directors.
  • Company names are legally protected. No other business can trade under your name.
  • Find out more limited company advantages and disadvantages.
  • All companies in the UK – of all sizes – are registered at Companies House (the ‘Registrar’).
  • Companies and directors must abide by the terms of the Companies Act 2006.

A business may also decide to form a public limited company (PLC) – where shares can be traded on the stockmarket. A PLC has a lot more legal obligations than those required of a private limited company.

Find out more about the different types of limited company in the UK.

Limited by shares or guarantee?

There are two types of private limited company:

1. Limited by shares

  • The most popular type of company.
  • Used by businesses that intend to make a profit.
  • Limited liability up to the amount the shareholder has agreed to pay for the shares.
  • Has shares and shareholders.
  • Pays Corporation Tax on any profits.
  • Must have at least one director.

2. Limited by guarantee

  • Often used by not-for-profit organisations, such as charities, organisations and clubs.
  • Has ‘members’ who run the company.
  • Limited liability for guarantors up to the amount stated in the Articles – usually just £1.
  • Any profits are re-invested into the business.
  • Must have at least one director.
  • Read our guide to guarantee companies.

Is a private limited company right for you?

Before you go ahead, there are a number of steps you need to follow:

  1. Do you have a viable business idea?
  2. Is the limited company the best business structure for you?
  3. Will your company be limited by shares or guarantee?
  4. Is your company name available?
  5. Have you chosen company directors or guarantors?
  6. What will your share capital look like?
  7. Are there any people with significant control (PSC) over the company?
  8. Do you need custom Articles of Association?
  9. Are you aware of your obligations as a director?
  10. How are you going to register your company? Direct, or via a third party?

How do you register a private limited company?

It is very easy to incorporate. If you register directly via Companies House, it costs a mere £12.

You can read our key guide to setting up a limited company, which covers all of the practicalities, and what information you need to gather before starting the registration process.

Or, if you have already decided to go ahead, try our partner formations agent, Clever Formations.

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