Limited by Shares

What is an A private limited company, or LTD?

If you are considering incorporating a private limited company (LTD/LIMITED) here's what you need to know about this business form A private limited company is a type of privately held small business entity. The liability of the members of a Private Limited Company is limited to the number of shares respectively held by them, which restricts shareholders from publicly trading shares.

 

Limited by shares

 

Companies limited by shares account for the majority of private companies registered in the UK. This company structure is mostly incorporated as the company exists as a separate legal entity from the individual owner. This means the owners have limited financial liability, so their personal finances are protected if the company encounters financial problems. Limited liability is a major benefit over the sole trader structure whereby the sole trader is liable for all.

 
  • Limited financial liability – Shareholders’ personal finances are protected and they are only responsible for company debts up to the value of their shares. Profits can be distributed by way of salary and dividends, and this can make it a very tax effective structure.
  • Members– a minimum number of 2 members are required and a maximum number of 200 members.
  • A number of directors– When it comes to directors a private company needs to have only two directors.
  • Shares can be sold at any time in order to raise additional capital or grow the business. Another company can be a shareholder or director in a limited company. However, there must always be at least one director.
  • Perpetual succession– Ownership of a limited company can be passed on. The company can continue to exist even in the event of the owner's’ death, insolvency, the bankruptcy of any of its members. as the company keeps on existing in the eyes of law, This leads to a perpetual succession of the company. The life of the company keeps on existing forever.– unlike a sole proprietorship
  • Company Name– It is mandatory for all the private companies to use the word private limited after its name. When you register a company name, it is protected and cannot be used by any other limited company or LLP, nor can another company register a name that is similar to your own company name.
  • 7. The incorporated status will greatly improve your professional image and business profile. Limited companies are often more appealing to prospective clients and investors, giving the impression of a well-organized, established and reputable business.
 

Share capital

 

When a limited company is formed it must issue one or more subscriber shares to its initial members. It may increase capitalization by the issue of further shares. The issued share capital of the company is the total number of shares existing in the company multiplied by the nominal value of each share. A company incorporated in England and Wales can be created with any number of shares of any nominal value, expressed in any currency.
For example, there may be 10,000 shares with a nominal value of 1p or 100 shares of £1 each. In each case, the share capital would be £100. Unissued shares can be issued at any time by the directors using a Form SH01 - Return of Allotment of Shares (Companies Act 2006 § 555) subject to prior authorization by the shareholders.
Transfers of shares in a private company usually occur by private agreement between the seller and the buyer, as they may not be offered to the general public. A stock transfer form is required to register the transfer with the company. The articles of

 

FORMATION PROCESS

 

Incorporating a company limited by shares is incredibly simple and almost anyone can do it. Due to the limited financial liability of this structure, there is relatively little risk in doing so as well. Here is what you need to know about the process of Setting up a company limited by shares and some key points about maintaining your business after company formation: All companies limited by shares must be legally registered with Companies House, the official Registrar of Companies in the UK.
You must have a unique company name to get approval from Companies House. You must have a registered office address – this is the official address of the company which will appear on the public record. This must be a full physical address (not a PO Box Number) in the same country as the company is registered. You require a minimum of one shareholder and one director to set up a company limited by shares. The same person can hold both positions.
Standard Industrial Classification (SIC) codes must be included to describe the business activities that your company will engage in. You can provide a maximum of four codes. Details of all people with significant control (PSCs) in the company must be included in the application. In most companies, the PSCs are the shareholders and directors.
You will need to complete a Memorandum of Association to state the names of the first shareholders (they are known as 'subscribers') and their intention to form the company and take at least one share. A governing document called the Articles of Association must be adopted during the company incorporation process - this outlines the rules and regulation of the company and its members and officers.