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Types of limited companies

There are several different kinds of limited companies available to set up in the UK. Limited companies are the second most popular business structure in the UK, only coming second to sole traders. The type of limited company structure chosen for a business will depend on various factors such as the number of shareholders, the responsibility that the shareholders have and the level of involvement by the public. Each has their own benefits, so each business will need to decide what is the most suitable structure for them.

Types of limited companies

The most popular kind of limited company in the UK is a private limited company, limited by shares. Although that is the most popular model of a limited company, there are others that also come under the category of a limited company. Here are the different types of limited companies that you can set up and run in the UK.

Private limited company – limited by shares (Ltd.)

A private limited company – limited by shares is a private company. Therefore, members of the public are not able to buy shares of the business. The ‘limited liability’ refers to the shareholders only being liable for their percentage of investment. For example, if a shareholder invests 20% of the cost for the business, then they are only responsible for the 20% of the company, including any debts. This is the most popular kind of limited company in the UK.  One of the many benefits of this structure is that it is easy to set up and it can be completely done online. An example of a private limited company – limited by shares is Virgin Atlantic.

Private limited company – limited by guarantee (LBG)

A private limited company – limited by guarantee is usually a company that is non-profit or a charity. This means that the individuals are not responsible for the amount they invested in the company as this type of company does not have shareholders. The people that are responsible for the business and any type of the debts are members of the board who act as guarantors. These guarantors then pay sums to cover any business debts, should the need arise.  An example of a private limited liability company – limited by guarantee that operates in the UK is Oxfam.

Public limited company (PLC)

A public limited company is similar to a private limited company, limited by share. The main difference is that a public limited company offers its shares to the members of the public. This means that members of the public can be shareholders of a company. As there are more people involved including these members of the general public, there are more legal requirements. Some requirements for a company to go public are having two company directors, two shareholders, a company secretary and at least £50,000 of issued share capital. An example of a private limited company is Barclays.

Limited liability partnership (LLP)

A limited liability partnership is similar to a limited liability company – limited by shares, however, instead of shareholders, there are partners. Also, the partners are not just liable for just their share of the business but are responsible for an equal part of the business. For example, if a company has four partners, each partner will be responsible for 25% of the business (which includes any debts). This structure is ideal if the partners want to be equally involved in the business as much as their partners, rather than just being shareholders. One of the biggest distinctions between a limited liability partnership and other limited companies is the role of the partners. The partners can actually directly manage the business. Other limited companies have a vote by the shareholders to elect a board of directors, who then select individuals to run the business. An example of a limited liability partnership is Deloitte & Touche.

Private unlimited company

A private limited company doesn’t have to submit an annual return or any financial statements compared to other limited companies. This enables a private unlimited company to remain private. The private unlimited company structure doesn’t have shareholders that are responsible for the amount of investment they’ve invested in the business. All the shareholders of a private unlimited company are responsible for business liabilities. If the company was to go bust and had debts, all the shareholders would be equally responsible and would have to share the debt. This type of limited company is quite rare. An example of a private unlimited company is Credit Suisse International.

More on limited companies and setting up a limited company.

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