What is Ltd Company Formation?
A Limited Company in the United Kingdom is registered according to the laws of the Limited Companies Act of 2006 which supersedes other company acts in the UK. A Limited Company is a business structure where members or shareholders have their liability limited to the contributions which they have made or invested in the company. Forming a Limited company has many advantages for owners and is easy to incorporate.
Our clients often ask, what is the limited company structure that is best for me? When considering starting up and registering a company it is important to consider the best means of maximising profits and the objectives of the company as this can determine the best business structure for you. Ltd company formation is affordable and can be completed quickly.
The Limited Company limited by shares is the most commonly registered Ltd Company. Presently in the United Kingdom there are 3 types of Limited Companies being offered:
- Private Limited Companies (Ltd)
- Companies limited by guarantee (Ltd)
- Public limited Companies (PLC)
A limited company can be formed by any one going into business to make a profit. The limited company business structure can be described as a simple and flexible structure. In cases where one member of the company decides to pull out of the company or should one member pass on the company can continue to function unlike a Limited Partnership.
What are the required officers for a Limited Company?
It is important to understand what a limited company’s membership is like and the roles they play in running the Ltd Company.
To incorporate a Ltd. company just one company director is needed. Directors for limited companies can be individuals and corporations but a limited company must have at least one director who is an individual. A director’s role in a limited company can be that of a managerial position in cases where a director is appointed to run the limited company. Shareholders of a Limited company can be directors.
We recommend appointing a Company Secretary for a ltd company, which, by the way, is not mandatory but a Company Secretary can make carrying out certain tasks easier. Although there are no specific duties outlined for UK limited companies in the Companies Act the role of Company Secretary includes recording minutes of meetings and ensuring that the members receive those with any updates in resolutions passed, informing the Companies House of any changes within the company and maintain company records among others.
Please also see Setting up a Limited Company.
Ltd Company — Taxation and Filing Requirements
Your Limited company is obligated to prepare and file financial records at the end of each financial year. All company accounts must be submitted to the Companies House and the HMRC. A financial year is regarded as twelve (12) months. The following must be made available at the end of each financial year:
- A Director’s Report
- A Profit and Loss Account
- An Auditor’s Report — small companies are exempted from filing auditors report and have the option to file abbreviated accounts*
- Balance Sheet
*companies which qualify for exemptions must meet two of the following conditions: a turnover of less than £6.5 million, employ no more than 50 or a balance of no more than £3.26 million on the Balance Sheet.
A UK Limited company must pay corporate tax on any profits the company has made in a financial year. Companies which are classified as “small” (Profits of no more than £300,000) will pay corporate taxes at the rate of 20%. A 24% tax rate is levied on companies with profits of £1.5 million and up.
It is important that all UK limited liability companies register with the HMRC to pay taxes as soon as the company started trading or not later than 3 months after incorporation.
To take care of your company’s accounting needs it is recommended that an accountant and or bookkeeper be employed to ensure that tax compliance requirements are met.
What are the benefits of trading through a Limited Company?
Trading through a Limited Company provides many benefits for the owners/shareholders of the company which cannot be achieved through other business structures:
- One of the major benefits of trading through a limited company is that the personal assets of shareholders, directors and other company officers will remain untouched in case of company bankruptcy. The assets of the Limited company will be used to pay any debts which the limited company may have to settle.
- The administrative requirements of limited companies are minimum.
- The costs of running a limited company are very low.
- Many other businesses prefer to trade with limited companies due to additional confidence the legal entity status provides. This is one of the reasons why the UK Ltd company is the most popular business structure.
- Tax planning and tax savings are very important to all businesses. Corporation tax for a limited liability company starts from 20%.
Your limited company registration will open up better business opportunities. Limited company taxes are set at low rates, which increase the returns for the shareholders. A major advantage of a limited company is its structure can be easily changed and the ltd company’s existence may not be affected, if a ltd company shareholder or officer decides to leave the limited company or unexpectedly dies. If you are thinking of running a business, Limited company is a great structure to consider.