In the UK, a limited company is a specific type of legal business entity that offers limited liability protection to its owners and is governed by the Companies Act 2006.
There are two common types of limited companies in the UK:
- Private Limited Company (Ltd)
- Public Limited Company (PLC)
Private Limited Company
This is the most common type of limited company in the UK, and is identified by the use of “Ltd” or “Limited” after the company name (you get to choose which variant you want).
The key features of a private limited company in the UK include:
Limited liability: Shareholders’ liability is limited to the amount unpaid on their shares. Personal assets are generally protected from the company’s debts and liabilities.
Taxation: Private limited companies are subject to corporation tax on their profits. Shareholders may also be subject to income tax on dividends they receive.
Ownership: Private limited companies can have one or more shareholders (owners), and they can be individuals or other companies. The company’s ownership is divided into shares.
Disclosure requirements: Private limited companies must file annual financial statements with Companies House. These statements are publicly accessible and provide transparency about the company’s financial health.
Public Limited Company
A public limited company is similar to a private limited company, but it can issue shares to the public and is identified by “Plc” after the company name. PLCs are subject to more extensive regulatory requirements and are often larger entities with shares traded on stock exchanges (although note that it is not a requirement for a PLC to be a listed company).
The key features of a public limited company in the UK include:
- Share capital and public share offering: A PLC is required to have a minimum share capital of £50,000 before it can start trading. It is also allowed to issue shares to the public, which means anyone can buy and sell its shares on recognised stock exchanges. This ability to raise capital from the public distinguishes PLCs from private limited companies, which have more restrictive rules regarding share ownership.
- “Plc” in the company name: A public limited company must have the abbreviation “Plc” or “PLC” in its company name to make it easily recognisable as a publicly traded entity.
- Limited liability: Similar to private limited companies, PLCs provide limited liability protection to their shareholders. Shareholders’ personal assets are generally protected from the company’s debts and liabilities, and their liability is limited to the amount unpaid on their shares.
- Directors: PLCs must have at least two directors, and at least one director must be a natural person (not a corporate entity).
How to set up a limited company
In the UK, forming a limited company involves several steps, including:
- Choosing a company name that complies with naming regulations.
- Registering the company with Companies House.
- Defining the company’s articles of association, which outlines its internal rules and regulations.
- Appointing directors and company secretaries (if required).
- Issuing shares to shareholders.
- Complying with ongoing reporting and filing requirements, such as annual financial statements, changes in company details, and the confirmation statement.
The rules and procedures for setting up a limited company in the UK are generally similar for both private limited companies and public limited companies.
The company name should not be identical or too similar to existing company names, and certain sensitive words or expressions may require special approval. Both types of companies must have a registered office address in the UK, which serves as the official address for receiving legal documents and correspondence.
What are the filing requirements of a limited company?
In the UK, limited companies, whether private limited companies or public limited companies, have various filing requirements that they must adhere to in accordance with the Companies Act 2006 and related regulations. These filing requirements are designed to ensure transparency, compliance with the law, and accountability.
Annual confirmation statement
Every limited company is required to file an annual confirmation statement with Companies House. This statement confirms that the company’s registered details, such as the registered office address, directors, shareholders, and share capital, are accurate and up to date. The confirmation statement must be filed at least once every 12 months, even if there have been no changes.
Annual financial statements
Limited companies are also required to prepare and file annual financial statements, which include a balance sheet, profit and loss account, and accompanying notes. The level of financial disclosure and reporting requirements can vary based on the size and type of the company. These accounts must be sent to Companies House and made available for public inspection.
Company Tax Return
Limited companies are subject to corporation tax on their profits. As such, they must file a company tax return with HM Revenue and Customs (HMRC) each year to report their financial figures and calculating the tax due. The deadline for filing the tax return can vary, but it is usually within 12 months of the company’s accounting period end.
PSC Register
Companies are required to maintain a register of Persons with Significant Control (PSC), which records information about individuals or entities that have significant influence or control over the company. This information is also filed with Companies House.
Payroll and VAT Returns
If a company employs staff, it must submit payroll-related filings, including PAYE returns and National Insurance contributions. If the company is VAT registered, it must also file regular VAT returns.
It’s important for company directors and officers to be aware of these filing requirements and ensure compliance. Failure to meet these obligations can result in penalties, fines, or even legal action.
Does a limited company need articles of association?
Both types of limited companies are required to draft articles of association. These documents outline the internal rules and regulations governing the company.
Limited companies in the UK offer several advantages, including limited liability for owners, a separate legal entity status, and credibility in business dealings. However, they also come with responsibilities such as compliance with company law and tax obligations. It’s crucial to seek legal and financial advice to properly set up and manage a limited company in the UK to ensure compliance with all legal requirements.
Other types of registered companies in the UK
Along with limited companies, there are a few other entities which are registered at Companies House. These include:
- Limited Liability Partnerships (LLPs)
- Unlimited companies – rare, but do sometimes exist
- Companies limited by guarantee – often used for associations and clubs
- Limited Partnership (different to a LLP)
- Community Interest Companies (CIC)
If you need any help in registering a company, deciding what structure to adopt or how to deal with the company secretarial work, then get in touch.
Get in touch with me today and I’ll help you through the process.
