What Does It Mean to Be a Limited Company In the United Kingdom?

What does it mean for a company to be “limited”?

A limited company is a separate company from its owners, which makes it easier to raise finance and make investments without having to pay tax. This is because the company itself pays taxes rather than individual shareholders. They are also known for offering better benefits than sole traders such as sick pay and pension contributions.

Starting a limited company is simple – you just fill out some forms and submit them to Companies House. You don’t need to do anything else. If you want to expand your business into another area, you can simply register a new company.

About Companies House

We publish news stories and blogs that give you insight into what goes on behind the scenes at Companies House. We are here to help companies understand how to comply with UK legislation and we want to hear from anyone who wants to tell us about something interesting that happened while working with us. If you think there is anything else we could do better please let us know.

Putting life into the Companies House register

The Companies House Register is one of the most important sources of information about companies in England & Wales. It contains records of every company registered in the UK since 1855. This includes all types of limited company, public limited company, unincorporated association, charity, trust, co-operative society, religious body, local authority, etc.

We provide free access to this data via our API.

Our mission is to make it easy to use the Companies House register to answer questions like “Does XYZ exist?” and “Who owns ABC Ltd?”. We do this by providing a simple RESTful JSON API to retrieve the required information.

If you want to know whether a company exists, we recommend checking the following resources:

Jobs at Companies House

Companies House is one of the most important government bodies in the UK. Its job is to hold information about every single company in England & Wales. This includes everything you might want to know about a company – such as where it is based, how many people work there, what products it sells, and much more.

We provide access to this information via our online database, and we make sure that the information is accurate and up-to-date.

What types of limited company are there?

Private companies are owned by shareholders – individuals or organisations – who own all or part the company. They can sell their shares to anyone else.

Public Limited Companies are owned by people who buy shares in the Company. They cannot sell their shares unless they are offered to the whole group of shareholders.

Companies Limited By Guarantee are usually set up to raise capital for a specific project. People who invest in such a company do not become shareholders; rather, they take out a loan against the future income generated by the company. This type of company is often used to fund start-up businesses.

Private company limited by shares

vs “Limited Company” – Which one is better?”

A private company is owned by it’s shareholders. They are called “private” companies because they don’t go through an IPO process. Shares are usually bought and traded privately. Shareholders must be individuals or entities outside of the company itself. A company limited by shares can’t issue new shares to the public. This type of company is often preferred over a limited company.

Public limited company

vs “private limited company”: What’s the difference?”

A public limited company (PLCo) is a type of legal entity that allows shareholders to buy shares in the company. A private limited company (PLCo) is similar, except it does not allow shareholders to purchase shares. Instead, investors must pay fees to join the company. These companies are typically larger businesses with many employees. PLCos can be listed on stock exchanges such as the London Stock Exchange (LSE), while PLCos cannot.

Many startups opt for a private limited company because it offers better tax benefits. However, there are some downsides to choosing a private limited company over a public limited company. For example, you won’t be able to list on the LSE unless you raise £250,000 ($320,000). You’ll also need to provide a prospectus to potential investors, whereas a public limited company doesn’t require one.

In addition, you don’t have access to certain financial information about your company. If you’re raising money via crowdfunding platforms, you won’t be allowed to disclose how much you’ve raised. Also, you won’t be eligible for a loan guarantee scheme offered by the government.

Private company limited by guarantee

vs “Limited company”

A company limited by guarantee doesn’t have any owners or shareholders; it’s owned by the people who make up the company.

A company limited by shares issues shares to investors. Investors become members of the company and pay money in return for shares. They are therefore entitled to dividends and voting rights.

Companies limited by guarantee are usually charities or government departments. Their purpose is to raise funds for charitable causes. If you donate money to a charity, you might receive a letter confirming that you are donating to a company limited by guarantee. You won’t find out what type of company it is unless you ask.

If you want to know whether a company is a company limited by guarantee or a limited company, check the terms and conditions of the offer.

Limited, but not limited companies

A limited company offers protection against personal financial risk. This could lead to bankruptcy. Shareholders will only be liable to the extent of their original investment. There are many benefits of creating a limited company including tax advantages, greater flexibility and better control over management.

Limited liability partnership

A limited liability partnership (LLP), sometimes called a “limited liability company,” is a type of business organization used to conduct business activities. In most countries, it is treated as a distinct legal person for tax purposes. LLPs differ from corporations because they do not pay corporate income taxes; rather, each partner pays his/her own individual income tax based on his/her share of profits. A partnership does not issue shares of stock, nor does it maintain reserves for shareholders’ claims. Instead, partners contribute capital to the firm and receive dividends in return. As long as the LLC complies with state law regarding formation requirements, it can operate anywhere in the world.

Limited partnership

A limited partnership is a legal entity that combines the benefits of a corporation and a trust. It offers limited liability protection to investors while allowing them to reap profits from the success of the enterprise.

In most cases, a limited partnership is set up to raise funds for a specific project. For example, it might be used to finance a building construction project. In such instances, the partners agree to put together a certain amount of cash and use it to fund the project. If the venture succeeds, each partner gets his or her share of the profit. However, if the project fails, no one loses anything.

The main advantage of setting up a limited partnership is that it allows you to avoid paying corporate income tax. Instead, you pay personal income tax on the profits you make.

Frequently Asked Questions

When should a company become a limited liability company?

There is no obligation for businesses that want to go public to eventually become one. In fact, many businesses remain private throughout their lifetime, either because they don’t feel ready to take on the extra scrutiny that comes with being public, or because they prefer to keep things simple.

However, there are some good reasons why businesses might decide to make the move into the public domain. Here are three of the most common ones:

1. To raise capital

Businesses often choose to go public to access additional funding. This could include debt financing, equity crowdfunding, venture capitalists, banks, pension funds, insurance companies, family offices, wealthy individuals and high net worth investors.

2. To protect shareholders

A public company is required to publish regular financial reports, including annual accounts and interim statements, and it must comply with strict accounting rules. Shareholders must be able to see how profits are distributed among different stakeholders. If you plan to list on the stock exchange, you need to ensure that your company complies with the relevant listing requirements. You will also need to appoint auditors and prepare detailed prospectuses.

Can a company that is open to the public become a private company?

Companies House offers advice on how businesses can convert from a public limited company into a private limited one. If you are considering converting, here are some things to consider.

The most common reason for changing status is to reduce the number of shareholders and/or directors. This could happen if there are fewer people involved in running the business than originally anticipated. For example, a small start up might decide to keep just one director and one shareholder rather than five.

Another reason for changing status is where the original purpose of setting up the company has changed. A company set up for charitable purposes might choose to stop carrying out those activities and concentrate on trading.

A third reason is where the original capital structure of the company has changed. In particular, if the initial capitalisation of the company was funded entirely by debt, it might now want to increase the proportion of equity funding.

A final reason for changing status is if the company wishes to make changes to its articles of association. These include reducing the maximum number of shares that can be held by members of the board of directors and increasing the amount of money that must be paid in cash each year.

If you are thinking about making such a conversion, please contact us. We will provide guidance on the process and answer any questions you may have.