1. What Does Private Limited Mean?
A private limited company (Ltd) is a business structure in the UK where the company is a separate legal entity from its owners. It has limited liability, meaning the shareholders are only responsible for business debts up to the amount they’ve invested.
2. Key Characteristics of a Private Limited Company
- Separate Legal Identity: The company can own property, enter contracts, and be sued in its own name.
- Limited Liability: Shareholders are not personally liable for company debts.
- Shares Not Publicly Traded: Unlike PLCs, shares in a private limited company can’t be sold on the stock exchange.
- Must Be Registered with Companies House: The company gets a unique registration number and must file annual accounts.
3. Who Owns a Private Limited Company?
Ownership lies with the shareholders. The number of shares held determines how much of the company each person owns.
- One person can own 100% of the shares
- Owners can also be directors, managing the company’s day-to-day operations
4. How to Set Up a Private Limited Company
To start a private limited company in the UK:
- Choose a unique company name
- Register online with Companies House (£12 fee)
- Provide a registered office address
- Appoint at least one director
- Define share capital and shareholders
- Prepare memorandum and articles of association
- Get a Certificate of Incorporation
5. Advantages of a Private Limited Company
- Limited liability protection
- Separate finances from personal income
- Tax benefits, such as paying corporation tax rather than income tax
- Increased credibility with clients and suppliers
- Easier to raise capital through shares
6. Disadvantages of a Private Limited Company
- More administration than sole traders
- Must file public accounts and confirmation statements
- Less privacy, as certain information is publicly available
- Involves legal responsibilities for directors
7. Compliance Requirements
Private limited companies must:
- File annual accounts with Companies House
- Submit a confirmation statement yearly
- Register and pay corporation tax
- Keep and maintain company records
- Report changes (e.g., new directors or address updates)
8. Examples of Private Limited Companies
- Small local businesses (e.g., digital agencies, consultancies)
- Family-run businesses
- UK subsidiaries of global corporations
- Start-ups looking for investment
Frequently Asked Questions
1. What does ‘Ltd’ stand for?
It stands for “Limited” and refers to limited liability.
2. Can I set up a private limited company alone?
Yes, one person can be the sole shareholder and director.
3. Are private limited companies public?
No. Their shares are privately owned and not available to the public.
4. Do I need an accountant for a Ltd company?
Not legally, but it’s strongly advised to stay compliant and manage taxes.
5. How are private limited companies taxed?
They pay corporation tax on profits. Directors may also pay income tax on salaries and dividends.
6. Can a private limited company become public?
Yes, through re-registration, though it must meet stricter requirements.
Conclusion
A private limited company is a popular and flexible business structure in the UK, offering limited liability, credibility, and potential tax benefits. Whether you’re a sole entrepreneur or launching with partners, it’s a powerful way to formalise and grow your business in 2025.