Types of Limited Companies

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A limited company can be set up as an organisation to run your business. This type of company is responsible for itself and its finances are very different from your own. After a limited company pays its corporation tax, it can share its profits. All profits made are owned by the limited company.


Each financial year the limited company puts its statutory accounts together and sends an annual return to Companies House. It also sends HMRC a tax return. If the company’s earnings will be more than £77,000 it registers for VAT. Many opt to employ a chartered accountant for this.


Whatever your situation, there are many limited company choices open to you. You might want limited financial liability, risk protection or to take advantage of tax efficient strategies. You might be established as a sole trader or as a freelancer, or you may not have any experience of different company types and wonder which one might suit you the best.


The options open for limited companies are variable:

The most common option is a private company which is limited by shares. This basically means that if the company struggles to stay afloat, the shareholders are only liable for the investment value they have made in company shares. All profits of a private company, limited by shares, belong to the business itself and would normally be invested back into it. This type of company is unable to sell shares to the public.


Another type of Limited company is the private company, limited by guarantee. These types of businesses tend to be social companies and not for profit organisations such as charities and enterprises without owners. The profits of these types of companies are reinvested into them. Company members do not buy shares in it. Directors will financially support the organisation up to a certain amount if the organisation is struggling.


The public limited company bears similarities to the private company limited by shares. However, with this company, its shares are able to be sold to the public. Directors/shareholders are liable for this company’s debts should the company not succeed.


The private unlimited company may feature share capital, or may not. The members have unlimited liability. This type of company does not need to disclose as much information, because of the unlimited liability of its members.


Once you understand the types of limited companies available, you can make an informed decision about which one will suit your new company.