There are quite a few reasons to establish your business as a limited company. Commonly abbreviated as LC, these are businesses typically owned by one or more individuals called members. Interested in setting up your own limited company and taking advantage of everything that these kinds of businesses have to offer, but don’t know where to start? Don’t worry – we’re here to give you a helping hand.
Types of limited companies
For practically anyone who’s looking to establish a limited company, it can be crucial to learn about some of the different options that are available. With an array of advantages and disadvantages, as well as options that simply aren’t suited to certain kinds of businesses, it’s always best to do your research. In general, you’ll find that there are three main types of limited companies.
Private limited company
In the United Kingdom, private limited companies are one of the most common kinds of LC, especially for small businesses. There are several reasons why this structure is so popular; from its tax efficiency to flexible management. Overall, this is considered to be a great option for small business owners in the UK.
Public limited company
Generally abbreviated as PLC, public limited companies are typically a better option for larger businesses. This structure offers their shares to the public, which can be traded on the stock exchange – and this is how most PLCs raise capital. While this setup isn’t ideal for everyone, it can certainly be worth considering if you’re looking for effective ways to boost your company’s capital.
Limited liability partnership
The general structure of an LLP allows each partner involved to spread the risks, skills, and leveraging across the owners – ensuring that everyone is equally responsible and liable for the business. Limited liability partnerships ensure that each member is liable for their own contribution to the business, and only that contribution, protecting the rest of the partners if things don’t go as planned. As a result, LLPs are more common among professional businesses.
How to set up a limited company
There are often several advantages that can come with registering a business as a limited company, which is why it might be worth taking a quick look into what they have to offer and how you could set up your own LC. Here are some of the most notable steps that people will have to go through when setting up a limited company:
- Make sure that the name you’ve chosen is available and that there aren’t any trademarks for it
- Decide who the company director, shareholders, and guarantors will be (you need at least one, who can also be the director)
- Prepare all the necessary documentation for how the company should be run, like the Memorandum of Association
- Ensure that you know all the types of documentation that you’ll need to keep (such as your accounting records)
- Register your company at an official address in the UK and choose a SIC code
How long does it take to set up a limited company?
Luckily for those who are hoping to register their own limited company, the process doesn’t tend to be long and drawn out. Depending on how you choose to apply and your unique situation, you could have the whole thing done in the space of 24 hours.
Usually, those who choose to register online will find that it’ll only take a few minutes to make their application – and this rarely takes longer than a day to be verified. While there are some people who prefer the more traditional methods, like postal applications, these can often take longer (around 8 to 10 working days to be exact).
Advantages and disadvantages of a limited company
Most of those who choose to set up a limited company do so because of the benefits that can come with it when compared to the alternatives – and there are quite a few that are worth keeping in mind. Here are some of the most notable advantages of setting up an LC:
- An LC will legally separate you from your business, making your company its own entity
- Limited companies can often help to reduce the owner’s liability
- An LC can bring a host of investment opportunities
While there’s a lot that these kinds of business structures have to offer, there can also be a few downsides to consider too. Let’s take a look into some of the most notable disadvantages:
- You’ll need to pay an incorporation fee
- There are some restrictions on company names
- LCs need to be incorporated at Companies House
What tax does a limited company pay?
It’s worth noting that the type of taxes for LCs and sole proprietors aren’t the same. While limited companies don’t have to deal with income tax or national insurance, they do have to pay corporation tax. If you don’t apply for corporation tax when you register your business, you’ll need to do it separately with the HMRC within 3 months.
How much is corporation tax for a limited company?
LCs are charged corporation tax, which is taken from any profits made by the business. This includes the profits on investments, sales, and trading. While this can change over time, the corporation tax rate for limited companies is currently set at 19%.
How to close down a limited company
As long as you have an agreement with your shareholders and company director, you’ll be able to close your limited company without much hassle. There are actually quite a few ways to do so, depending on your situation and the state of the business, so in most cases, a little research will be worthwhile.
Establish your own UK-based limited company with Workhy
Fortunately for anyone who’s interested in setting up their own LC, it doesn’t have to be too complicated. In fact, when working with Workhy, you’ll discover that establishing your limited company won’t be too much of a challenge at all. Whether you want help with setting up, managing, or growing your LC, we’ll be here to give you a helping hand.