Private Limited Company Examples
You may be interested in our main Article on Limited companies and tax structures. You may also be interested to know how more about our property tax services to help you buy and rent residential properties in a more tax-efficient way.
The frequently asked questions about Private Limited Company Examples
As property accountants, we are regularly asked about Private Limited Company Examples. Therefore, we will look to answer the below questions in this Article.
“Are you paying too much property tax?”
“What are the basics of Private Limited Company Examples?”
“What is a Private Limited Company?”
“What are the benefits of a Private Limited Company?”
“How do I set up a Private Limited Company?”
“Are there disadvantages to a Private Limited Company?”
“What is the difference between a sole trader and a Private Limited Company?”
“What sort of businesses can be a Private Limited Company?”
“Who can run a Private Limited Company?”
“How does this affect our American readers?”
Are you paying too much property tax?
Our property tax specialists help over 1,000 monthly retained UK landlords and property investors to minimise tax whilst building their wealth.
There are many reasons why people pay far more property tax than they need to. This is because:
– They do not know what they do not know.
– They have not spoken to a tax specialist to go through their situation to see what available tax reliefs are available to them.
– Their accountants or solicitor are not aware of the many reliefs available to their clients and are not taken advantage of.
– Tax legislation changes but either the person or their accountant/tax specialist have not been made aware.
What are the basics of Private Limited Company Examples?
As property accountants serving thousands of UK landlords that purchase buy to let properties, we know that choosing the right property tax structure is an important decision for our clients to make.
Private sector businesses account for 35% of the UK’s businesses, with over one million in London alone.
More than four million Limited Companies are registered in the UK with over 500,000 new companies being incorporated annually.
A Private Limited Company is simply a Limited Company.
Private Limited Companies can also be called a PLC. This is not to be confused with Public Liability Company (PLC).
There are different types of Limited Companies, including Limited Liability Partnership (LLP) and Special Purpose Vehicle (SPV).
Limited Companies pay Corporation Tax on their profits at 19%, which is set to increase up to 25% from 2023.
Corporation Tax is paid on total profits, minus allowable business expenses.
Limited Companies do not pay income tax or national insurance and are a separate entity from the owners, directors and shareholders.
In the UK, all Limited Companies must be registered at Companies House, and the information about Limited Companies is held on a public register available for anyone to see.
There are no restrictions on who may use a Private Limited Company business structure.
Limited Companies in the UK can include hairdressers, cafes, restaurants, manufacturers, and of course, property-related activities such as property investments and property developers.
We have written a detailed article called What is a Private Limited Company will also provide useful additional reading.
There is helpful Government advice on running a Limited Company that is worth reviewing.
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What is a Private Limited Company?
A Private Limited Company is the most common form of UK company incorporation.
The company is an individual entity in its own right, operating as a distinct legal entity to its director, shareholders and employees.
It is set up by registering the company with Companies House.
All the business assets, liabilities and profits in a Private Limited Company belong to the company itself.
Shareholders are not wholly responsible for any debts incurred by the company.
A Director of a Private Limited Company is classified as an employee of the company. In the event of a legal dispute or debt issues, it is the company that is pursued or sued, not the Director.
If a Private Limited Company fails, the Director’s personal assets such as home and savings are not at risk.
A Shareholder’s liability in a Private Limited Company is limited to the shares they hold in the business.
The business must invite shareholders before they can purchase a share in the business. A share is a percentage of a company.
There are specific rules associated with operating and trading within a Private Limited Company covering areas such as
– borrowing money
– pension payments
– how Directors and other employees are paid
– raising capital
– reporting business accounts annually and
– selling the Company
A Private Limited Company can be a small or large business.
A Private Limited Company has limited liability, and often these types of businesses have ‘Limited’ after the business name. For example, this is the case with our accountancy firm Optimise Accountants Limited.
Private Limited Companies pay Corporation Tax.
This is a tax on the profits of a business. One of the main disadvantages of setting up and running a Private Limited Company is the paperwork that must be legally completed.
This paperwork includes registering with Companies House and filing annual financial reports.
What are the benefits of a Private Limited Company?
The owners of a company have limited liability, which, as outlined above, can protect their personal assets in the case of a dispute against their business.
Operating a business as a Limited Company also gives individuals the opportunity to be their own boss.
New Shareholders must be invited into a Limited Company, which protects the business from any unwanted outside influence or attempted hostile takeover bids from other businesses.
Shares in a Limited Company can be sold to raise money, which allows the business to expand and grow.
No minimum capital amount is required to set up a Private Limited Company, making it flexible.
A Limited Company enjoys free and easy transfer of shares.
If the owner or founder dies, a Limited Company has uninterrupted existence.
Many of our property investor clients prefer to operate through a Private Limited Company business structure over sole ownership. There can be a perception of increased commercial credibility when trading as a company.
The tax advantages and limited personal liability make a Limited Company a favourable option.
Many UK landlords use a Limited Company to purchase buy-to-let properties and save on tax. It is important to consider the wealth and tax consideration when setting up a Limited Company.
We recommend that you speak to a tax accountant who understands different business structures.
How do I set up a Private Limited Company?
The first step in setting up a Private Limited Company is to establish whether this is the right business structure for you.
Then choose a name for the business, Directors, and a Company Secretary.
You will need to decide who the Shareholders or Guarantors are and identify people with significant control (PSC) over the business.
Preparation of documents confirming how the company will be run needs to be completed.
Check what records will need to be kept, then register the business with Companies House.
You will need to create shares within a Limited Company structure.
Set up a limited company in the right tax structure
We will help you identify the right tax structure and then set up the limited company for you
The different types of share are Preference Shares, Ordinary Shares and Alphabet Shares.
Preference Shares are used when you wish to have ownership of the business but want a guaranteed form of income.
You will agree on investing in a Private Limited Company and the % return required annually.
Ordinary Shares are the most common format of share distribution within a Private Limited Company.
A value is agreed per share and how many shares each person will pay.
The greater the number of shares, the greater the ownership that each person has in the business.
Alphabet Shares are similar to Ordinary Shares, although they offer more flexibility for the payment of dividends.
It is important to research on setting up a Private Limited Company before investing time and money.
If you’re unsure about utilising a Private Limited Company as your business structure, speak to a tax account with expertise in Limited Company organisation.
Are there disadvantages to a Private Limited Company?
Setting up and running a Private Limited Company offers many advantages, but there are also potential downsides involved when setting one up.
There are legal requirements such as completing annual accounts and returns to Companies House.
Setting up and running PAYE and payroll for Directors and employees within a Limited Company must also be organised.
Delivering a Corporation Tax Return to HMRC annually, which involves time, paperwork, and money.
Producing quarterly VAT returns for HMRC if your company is VAT-registered needs to be completed.
Missing a deadline or payment on money owed to HMRC could result in a large fine for your company.
Getting paid is complicated for a Private Limited Company.
A sole trader can take cash out of their business without restriction, but as an owner or Director, the Limited Company has to legally transfer money in the form of a salary or dividend.
You will need to register for PAYE with HMRC to pay yourself as a Director of a Limited Company and run a monthly payroll to draw a salary.
Setting up a Limited Company needs registration with Companies House, paying annual fees and informing HMRC.
If you decide to close your Limited Company, you need to apply to dissolve the business, which can take up to three months.
A Limited Company may require an outside professional accountant to help manage its finances.
Shareholders of a Private Limited Company will also expect to get a percentage of the profits as dividends.
What is the difference between a sole trader and a Private Limited Company?
The biggest difference between a sole trader and a Private Limited Company is that a Limited Company has a special status in the eyes of the law.
Part of a Limited Company’s definition is its incorporation.
It is formally set up and registered at Companies House. Shares are issued to its shareholders.
A sole trader is considered to be self-employed. You must register with HMRC for self-assessment.
As a sole trader, you keep profits after-tax but are also personally responsible for any business debts. In addition, a sole trader can employ staff.
Sole traders pay income tax and National Insurance contributions and submit a tax return annually.
Sole trader business structures are low cost and easy to set up with full control being retained but have full liability for any debts.
Private Limited Companies are incorporated and limited by shares.
The Company has shareholders, and the liability of the shareholders to creditors of the company is limited to any money they originally invested.
A company limited by guarantee must have at least one Director and one Guarantor.
An individual can assume both positions, or there can be multiple Directors and Guarantors in place.
Company Directors run the company on behalf of the shareholders. A Director can be a shareholder.
Limited Companies pay an application fee and are incorporated with Companies House.
To register your Limited Company with Companies House, you will need the company’s name and registered address, at least one Director and one Shareholder, details of the company’s shares, and the Articles of Association, outlining rules about how the company will be run.
Private Limited Companies offer less personal financial exposure whilst giving limited liability protection.
They also involve higher set-up costs than being a sole trader, including annual accounts and financial reports, which must be placed in the public domain.
What sort of businesses can be a Private Limited Company?
Limited Companies can be private or public.
A Private Limited Company does not publicly trade shares on the Stock Exchange and is limited to a maximum of 50 shareholders.
Good examples of Private Limited Companies are local retailers such as shops or restaurants without a national presence.
A Public Limited Company is a larger corporation with a chain of stores and shares that anyone can buy or sell.
The majority of Private Limited Companies are small as there is no minimum capital requirement to incorporate a Limited Company other than issuing at least one share.
Initial share capital is often around £100, and accounts filed with Companies House are usually modified.
Speak to a property tax accountant about setting up your property investment company in the right business structure for you and your future needs.
Who can run a Private Limited Company?
Limited Companies must have at least one Director, and most company owners are Directors.
This means that you can own and manage a Limited Company yourself or with others.
As a Director of a Private Limited Company, you are required to do the following in running the business:
– Follow the company’s rules, as outlined in its Articles of Association
– Keep company records and report changes
– Files accounts and the company tax return
– Tell shareholders if you might benefit personally from a company transaction
– Pay Corporation Tax at a flat rate of 19%, soon to increase up to 25% from 2023.
A Director can hire other people to assist in the running of a Limited Company, such as an accountant. However, a Director is still responsible for the company’s records, accounts and commercial performance.
If you set up a Limited Company yourself, it is possible to either own 100% of all the shares or with others, dividing available shares between the shareholders.
To become a Private Limited Company shareholder, you must purchase one or more shares issued by the company.
These shares are issued when you form the company with each share representing an equal percentage of the business.
Additional shares can be created and issued after the company is incorporated.
The more shares you hold, the bigger the percentage of a Limited Company you own.
How does this affect our American readers?
To learn more, make sure you head over to our sister company Purser Tax that helps British people save tax in the US and Americans save tax in the UK.
It is one thing to be tax-efficient in the UK or the US; it is another thing to be tax-efficient across the Atlantic.
This is why you need to get a tax advisor that truly understands international tax.
You may have a limited company in the UK, but are you aware of the tax issues as an American? I am referring to Global intangible low-taxed income, called GILTI. A UK limited company is very similar to a C Corporation that may be set up in the United States.