• Startups
  • December 23, 2021

What is a private limited company (LTD)?

article
If you are starting a new business and have decided that a limited company is the legal structure that will ensure you meet your business goals, it is likely that you will be forming a private limited company. A private limited company can be used as a structure for any type of business, for example, a plumber, hairdresser salon, photographer, law firm, dental practice, accountant, or restaurant.

The owners of a private limited company are known as shareholders and in practice the shareholders are usually also the company’s directors. Unlike a public company where shares are available for sale to the public, new shareholders have to be invited by the business to purchase shares and the Articles of Association will strictly control how and when shares can be transferred. 

How do I set up a private limited company? 

To set up a private limited company you need to fill in Form IN01 and file it at Companies House along with a Memorandum of Association and Articles of Association.


What are the advantages and disadvantages of a private company?

If you are thinking of setting up a private limited company it is helpful to understand its pros and cons.

Advantages

  • the liability of the shareholders is limited
  • you get to be your own boss and unlike a public company can control the extent of outside influence on your business decisions
  • shares in the company can be sold to raise capital

Disadvantages

  • unlike setting up as a sole trader or a traditional partnership anyone can view your company accounts as they must be filed annually with Companies House
  • as a director of a private company you will owe certain duties and responsibilities under the Companies Act 2006


Wrapping up

Choosing a private limited company as your legal structure requires careful thought as to the advantages and disadvantages and how these will affect your commercial ambitions. Before committing to registering as a private limited company it is best practice to speak to a Company Law Solicitor who can advise you on the options available.


Get legal assistance from LawBite

Many start up businesses choose to operate as a private limited company. There are a lot of legal requirements that you need to consider when starting this journey, such as completing annual accounts and returns to Companies House, delivering a corporation tax return to HMRC, setting up and running PAYE and payroll, and producing quarterly VAT returns for HMRC.

Protect your business from the start by speaking with a business lawyer. Book a free 15-minute legal consultation to discuss your legal issues today.

Additional useful information

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.



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