Limited by Shares

The majority of new companies that are incorporated in the UK are ‘Limited’ (abbreviated to Ltd). The private limited company structure enables companies that generate profits to pay their shareholders using a tax efficient blend of salary and dividends.

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 at any time. Because the company is a separate legal entity that is owned by the shareholders, each shareholder is only responsible for the amount of company debt equal to the value of their own shareholding, i.e. 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 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
  •  Because shares can be transferred to new or existing shareholders at any time, there is the 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
  •  The name of a limited company is unique and no other company or entity can register with either the same name or one that Companies House deems too similar
  •  Limited companies have the gravitas of a professional business operation 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

During the incorporation process, shares are issued to the initial shareholders of a company. However, 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 issues 100 shares with a nominal value of £5 (per share) 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. Issued shares can be transferred between shareholders or sold to a new shareholder

HOW IS A LIMITED BY SHARE COMPANY 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, visit our homepage to use our quick check tool to verify its availability.

This quick search tool is connected to the Companies House database and can immediately confirm if your chosen company name is available and approved by Companies House. If the proposed company name is too close to, or the same as an existing company name Companies House will not approve its use

We are pleased to offer our quick search tool free of charge which means that you can try as many variations as many times as you like until you find one that is suitable, available, and approved.

2. Select a package

There are three types of Limited company available:

For each type of Limited company available, 121 Company Formation offers different company formation packages so you can choose what level of support you need for the company’s incorporation and during its first year of trading.
The company incorporation packages have been designed to suit every budget. Plus we offer you the option to add on additional business support services at any time, from administrative services such as a telephone answering service for small businesses to a full range of bookkeeping and accounting services.

3. Submit payment

Make your selection once you have decided which package is most suitable. You will be asked to complete your order details and submit payment through our secure process using a credit card, debit card, or via PayPal. An order confirmation and an invoice will then be emailed to you.

4. Complete your company’s details

On 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.

We will review the application for errors and omissions before submitting to Companies House. Within 24 hours your company will be formally incorporated and registered at which time we will email your company’s statutory incorporation documents. Depending on the company formation package you purchase, you may also receive printed copies of the documents via the mail.

FREQUENTLY ASKED QUESTIONS

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 National Insurance (NI) contributions. While sole traders have the benefit of owning all of the assets of the business, the responsibility for all the company’s debt also lies with them.

Sole traders have the advantage of not having to file a set of accounts and other statutory documents at Companies House. As a result, no details for the sole traders’ 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 to 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. Shareholders are only responsible for the amount of debt that is equivalent to the value of the shares they hold.

A limited company’s 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 shares, their personal assets are protected should the company become insolvent

Sole traders do not enjoy this protection since the owner of a business is entirely responsible for all of its debt and could therefore lose personal assets such as properties, vehicles and savings should the business fail.
The directors of a limited by shares company are responsible for the submission of certain documents to Companies House and HMRC on a regular basis. This includes:
 

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