What are the different types of limited companies in the UK

In the United Kingdom, there are various different types of limited businesses that can be formed. Limited corporations are the second most common company structure in the UK, trailing only sole proprietorships. The type of limited company structure chosen for a firm will be determined by several criteria, including the number of shareholders, the level of responsibility held by the owners, and the extent of public involvement. Each has its own set of advantages, so each company must determine which structure is best for them.

Private limited company – limited by shares (Ltd.)

A private limited corporation is one that is limited by shares. As a result, the general public is unable to purchase shares in the company. The term "limited liability" refers to the shareholders' responsibility being restricted to their percentage of investment.

Private limited company – limited by guarantee (LBG)

A private limited corporation – limited by guarantee is typically a non-profit or charitable organisation. Because this form of corporation does not have shareholders, individuals are not liable for the money they invested in it.

Public limited company (PLC)

A public limited company is similar to a private limited company in that it is limited by share capitalization. The fundamental distinction is that a public limited corporation sells its shares to members of the general public.

Limited liability partnership (LLP)

A limited liability partnership is similar to a limited liability company in that it is limited by shares, but instead of shareholders, it has partners.

Private unlimited company

In comparison to other limited companies, a private limited company is not required to file an annual return or financial statements. This allows a private unlimited firm to maintain its privacy. The private unlimited company structure does not include shareholders who are accountable for the amount of money they put into the business.

Why a limited company is better than a sole trader

One of the first decisions to be made when starting a small business is the legal structure to be used. It can be a sole proprietorship, a limited company, or a partnership.

Here are some of the reasons why forming a limited company may be preferable to becoming a sole trader.

Limited liability

One of the most significant advantages of using a limited company structure rather than operating as a sole trader is that you have limited liability. If you want to work as a sole proprietor, you will be solely responsible for your company's finances. As a sole trader, the owner of the business and the business are treated as one entity. In contrast, in the eyes of the law, a limited company is a separate entity from the business.

Tax

Another significant advantage of a limited company over sole proprietorship is that doing business through a limited company is more tax efficient. This is due to the fact that a limited company owner is only required to pay corporation tax and dividend tax. A sole trader, on the other hand, must pay tax on all profits that exceed their personal tax allowance.

Annual accounts

The main disadvantage of choosing a limited structure over a sole trader is that you must prepare annual accounts as a limited company owner. These must be filed with Companies House. You will also be required to file a full set of corporation tax accounts with the HMRC. A sole trader, on the other hand, is not required to file any of the accounts that a limited company owner must.

Perception

Businesses may perceive a limited company as a better model to work with than a sole trader. This is related to the limited liability of a limited company once more. Businesses, contractors, clients, and others are more likely to work with a limited company because they believe it is more professional.

Accotax Accountants in London will provide you with expert advice and practical assistance to support you as a director. We are also providing services for limited company accountants. Please call us on 0800 644 1258 email [email protected] or call our senior consultant Sue directly on 0800 644 1258. More on limited company tax and accountants for limited company accountants.