Limited Liability Company
Limited companies exist in their own right, which means that the company's finances are separate from the personal finances of their owners.
Shareholders may be individuals or other companies. They are not responsible for the company's debts unless they have given guarantees - for example, a bank loan. However, they may lose the money they have invested in the company if it fails.
- Private limited companies can have one or more members, e.g. shareholders. They cannot offer shares to the public.
- Public limited companies (plcs) must have at least two shareholders and must have issued shares to the public to a value of at least £50,000 or the prescribed equivalent in euros before it can trade.
- Private unlimited companies - these are rare and usually created for specific reasons. It is recommended you take legal advice before creating one.
- Must be registered (incorporated) at Companies House.
- Must have at least one director (two if it's a plc) who may also be shareholders. Directors must be at least 16 years of age. At least one director must be an individual, rather than a company.
- Private companies are not obliged to appoint a company secretary but if one is appointed this must be notified to Companies House. Plcs must have a qualified company secretary.
Management and raising finance
- A director or board of directors make the management decisions.
- Finance comes from shareholders, loans and retained profits.
- Plcs can raise money by selling shares on the stock market, but private limited companies cannot.
Records and accounts
- Accounts must be filed with Companies House before the filing deadline to avoid a late filing penalty.
- Accounts must be audited each year unless the company is exempt.
- When you file your annual return for the first time a letter will be issued to the Registered Office containing the company's authentication code and instructions for use of Companies House web filing services. You should follow the instructions in the letter.
Directors are responsible for notifying Companies House of changes in the structure and management of the business.
- Profits are usually distributed to shareholders in the form of dividends, apart from profits retained in the business as working capital.
Tax and National Insurance
- If a company has any taxable income or profits, it must tell HM Revenue & Customs (HMRC) that it exists and is liable to corporation tax.
- Companies liable to corporation tax must make an annual return to HMRC.
- Company directors are an office holder of the company and therefore regarded as an employed earner for National Insurance. As such, company directors must pay both income tax and Class 1 National Insurance contributions on their director's earnings. However, while regular employees' Class 1 NICs are calculated on their monthly or weekly earnings separately, directors' NICs are calculated on an annual cumulative basis.
- Shareholders are not personally responsible for the company's debts, but directors may be asked to give personal guarantees of loans to the company.
Source: Businesslink.gov.uk - Legal Structures, The Basics