UK Limited Company

What is a limited company?


A lot of small businesses function via limited liability companies. There are around 1.15 million UK limited companies working at the moment, compared to approximately 2.8m sole dealers and 500,000 partnerships.

So, what exactly is a limited company?
Under the Ltd. business structure, your company and personal finances are kept divided, opposed to the sole trader structure.
Limited companies are subjected to corp tax on their profits, whereas sole traders are taxed under the self assessment arrangement.
If your limited company is doing turnover £70,000 or more for a year (from 1st April 2010. Until now it was £68,000), you must register for Value Added Tax.
Limited company managers take in more legal, financial and administrative obligations, whereas sole traders have an softer life when it relates paperwork.

A limited company is possessed by its shareholders
If things go wrong and a limited company breaks down, its directors and shareholders have 'limited liability' in that their personal assets can't be impacted. For sole traders, their personal liability is limitless.
A Private Limited Company can't offer shares purchasable on the stock market, whereas a Public Limited Company can.
All limited companies must be registered at Companies House.
All limited companies should pass on an 'Annual Return' to Companies House annually in addition to their annual accounts.
In some industries, most businesses are limited companies for a number of reasons - it may look more 'professional', it may help if you need to raise extraneous finance, and it could be more tax effective than other business structures.
From April 2008, UK limited companies are no more asked by law to have a company secretary. They can now operate with just a sole director. You are able to read more about the steps involved in the limited company incorporation action here, and as well a beneficial legal overview of all the main business structures.
You can piece a limited company straightaway with long-term company formations.

Before you start

When making the choice of business structure, you should always consult a professional, as each business has different needs.
There's no 'right' or 'wrong' business construction to use -it all depends on what you do, your financial situation, the industry you're in, and how large your operation is likely to become.