Private Limited Companies are governed by the ‘Companies Act 1985’. A Private Limited Company is a legal entity in its own right; separate from those who run it, the shareholders. The limited liability, potential tax advantages and simplicity in running a private limited company make it the most common form of registered business in the UK. As a shareholder, your personal assets remain separate (unless they are secured against the business for borrowing) and your risk is reduced to only the money you have invested in the company and any shares you hold which you have not paid for.
There is no minimum capital requirement for a Private Limited Company. Private Limited Companies are required to have a minimum authorised share capital of GBP1 (or its currency equivalent) and are formed with both authorised and issued share capital. The minimum issued capital is one share but additional capital is usually issued to reflect the stability of the company. Unissued shares can be issued at any time by the directors, subject to prior approval from the shareholders. Shares in a Private Limited Company are transferred by private agreement between the seller and the buyer.
The three main reasons of trading as a limited company are status, tax efficiency and limited liability.
Limited Liability: It is the biggest benefit of running your business as a limited company. In case the company goes in to financial difficulty, the assets and personal finances of shareholders are protected beyond value of their shareholding. This means that if a company is unable to pay debts, the shareholder will only have to contribute according to the nominal value of their shareholding. It can be as small as £ 1.
If you want to provide high value services or supply which can lead to liability claims and/or operate in public domain then limited liability is important. In such situations, your personal finances and assets are protected. Operating as a sole trader does not have this benefit.
Tax efficiency: More opportunity and great flexibility is offered by limited companies in the case of taxation on profits and on personal income. The profits of companies have a rate of 20% Corporation Tax regardless of the size of profit. On the other hand, sole traders pay 40% income tax if their profits are between £31,868 and £150,000; and the rate is 45% for profits above £150,000.
The directors can keep their income level below the higher bands through taking remuneration in combination of dividends and salary. This results in more money being available for reinvestment or distribution among the shareholders and directors. Sole traders don’t have any such strategy to save tax.
Professional Status: A professional and corporate image is created by a limited company, thus boosting the value of business. More corporations and industries like to do business with companies, instead of sole traders. This is because limited companies are considered to be more established, credible and committed. Sense of security is also provided by limited liability to certain industry professions while choosing to use the services of new business or while investing.
Documents required for company formation:
- In order to register a Private Limited Company the company name must be officially approved by the Registrar of Companies. Once approved the following documents are required:
- Certified proof of ID for directors / shareholders and beneficial owner
- Certified proof of address for directors / shareholders and beneficial owner
- Completed Application Form (supplied by Maple Leaf)
The formation of a Private Limited Company is a very quick process and we can even offer samed day incorporation (once all documents are received and approved),
The following documents will be received upon incorporation:
- A Certificate of Registration
- Memorandum and Articles of Association
- Minutes of the First Meeting of Directors
- Share Certificates and Company Register
At Maple Leaf we provide a high-level service that will ensure your limited company is set up and registered correctly. Our team of experienced professionals can offer bespoke advice tailored to your needs.. Start your limited company with Maple Leaf and we will hold your hand through the process. www.mapleleaf.global