Limited by Shares |

The majority of new companies that are incorporated in the UK are ‘Limited’ (abbreviated to Ltd) because this private limited company structure is used by businesses who intend to generate profits, in the form of dividends or salaries, for their shareholders which can be extremely tax efficient.

Another reason this type of company is popular is because it limits the financial liability of the shareholders should the company become insolvent or face liquidation in the future. Because the company itself is a separate legal entity that is owned by the shareholders, this means that each shareholder is only responsible for the amount of company debt equal to the value of their own shareholding thus their personal finances are protected.

Other benefits of a private limited by share company include:

  •   They can be incorporated with just one director and one shareholder who can be the same individual
  •   For companies incorporated In England and Wales, any number of shares of any nominal value can be issued and these can be expressed in any currency
  •   Capital can be raised through the issue of new shares
  •   A corporate entity can hold the position of either a director or shareholder or both
  •   There is an option for the ownership of a private limited company to be passed on in perpetual succession even if the current owner dies, becomes insolvent or bankrupt because the shares can be transferred to new or existing shareholders at any time
  •   The name of the limited company is unique to it and no other company or entity can register with either the same name or one that is deemed too similar by Companies House
  •   Limited companies give the impression of being a professional business by having recognised shareholders and directors whose duty it is to run the business responsibly

An explanation of the shares and share capital in a limited by share company

At incorporation, shares are issued to the initial shareholders of a company but, as mentioned above, new shares can be issued at any time to raise capital.

The share capital of a company is represented by the total number of shares in issue multiplied by the nominal value of these shares. As an example, if a company had issued 100 shares with a nominal value of £5 then the company’s share capital would be £500.

Any unissued shares can be issued to a shareholder at any time providing the other shareholders agree to this and issued shares can be transferred between shareholders or sold to a new shareholder.

How a limited by share company is incorporated

There are four simple steps in the 121 Company Formation process:

1. Choose a company name

Once you have decided on the name you would like to use for your company, simply visit our homepage , to check its availability straight away.

This quick search tool is connected to the database at Companies House and will immediately confirm if your chosen name is available to use and approved by Companies House.

If the proposed name of the company is too close to or the same as an existing company name then Companies House will not approve its use but our free search tool means that you can try as many variations of a name or a completely new name as many times as you like until you decide on one you would like to use that is available and can be approved.

2. Select a package

For each type of limited company available, 121 Company Formation offers four different packages so you can choose what level of help and support you need both for the company’s incorporation and during its first year of trading.

The packages have been designed to suit every budget too and you can always add on any additional services you find you subsequently need from our excellent range.

3. Make payment

Once you have decided which package you would like, together with any additional services, simply make your selections and you will be asked to complete your order details and make payment through our secure process using a debit or credit card or via PayPal. An order confirmation and an invoice will then be emailed to you.

4. Complete your company’s details

Following receipt of your order and payment, you will be asked to complete a company incorporation document online which will prompt you to enter details of the company’s registered address, full details of its officers, its shareholders, SIC code and so forth.

On receipt of this, we will review the application for errors and omissions before submitting to Companies House and then your company will be formally incorporated and registered within 24 hours at which time we will forward the company’s statutory incorporation documents.


Basically, a sole trader is self-employed and as such has to register with HMRC for self-assessment for the payment of income tax and NI contributions. While sole traders have the benefit of owning all of the assets of the business, the responsibility for all the debt also falls to them.

Sole traders have the advantage of not having to file a set of accounts and other statutory documents at Companies House and therefore no details for their business operations are available to the public or their competitors.

On the other hand, limited by shares companies are required to file full details of the owners (shareholders), management (directors) and financial status of the company at Companies House and register to pay corporation tax to HMRC on any profits made by the company.

However, unlike sole traders, the shareholders are not responsible for all the debts of the company, only the amount of debt that is equivalent to the value of their shareholding and shares can be held by individuals or corporate entities.
Because shareholders are only responsible for the amount of debt that is equivalent to the value of their shareholding, their personal assets are protected should the company become insolvent.

However, sole traders do not enjoy this protection since the owner of a business is entirely responsible for all its debt and could therefore lose personal assets such as properties, vehicles and savings should the business fail.
Every year, the directors of a limited by shares company are responsible for the submission of certain documents to Companies House and HMRC by the due date. This includes
  •   Confirmation statement whether or not there has been any changes
  •   Annual accounts
  •   Annual corporation tax return
  •   Quarterly VAT returns

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