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Most new companies registered in the UK are Private Limited Companies limited by shares.
The reason why the Private Limited Company platform is so popular is because it allows profits to be shared by the shareholders while restricting financial liabilities. The liability for company debts is limited to each shareholder’s value of their shares. This protects shareholders’ personal assets if the LLC encounters any financial problems.
The law which created and governs Private Limited Companies is The Companies Act 2006 which was amended by the Corporation Tax Act 2009.
The United Kingdom of Great Britain and Northern Ireland otherwise known as Britain or the UK is located in Western Europe. Its political system is a unitary parliamentary constitutional monarchy with Queen Elizabeth II as its monarch and a democratically elected Parliament with its Prime Minister.
UK Private Limited Company (LLC) Benefits
UK Private Limited Companies enjoy several benefits like:
• Limited Liability: Shareholders liability is limited to the value of their total shares.
• Simple Registration: A LLC can be registered faster and more simply than UK corporations.
• One Shareholder/Director: Only one shareholder is required who can also be the sole director.
• No Minimum Share Capital: Shares can have any value even as low as £1(GBP).
• No Required Meetings: The government does not require any type of meetings to be held.
• Secure Political and Legal Systems: UK’s political and legal systems have been consistently secure for centuries.
• English: The official language is English.
As long as the LLC company name is not similar to any other UK company’s name, there are no restrictions regarding the type of name chosen.
“Same as” names include when the only difference with existing names are:
• Special characters like using the “plus” sign; or
• Simple punctuations;
• A character or word commonly used in UK company names; or
• A character or word appearing similar or with the same meaning as another existing name.
An example would be “Hand’s Ltd” or “Hands UK Ltd” being the same as “Hands Ltd”.
The company name must end with either the word “Limited” or the abbreviation “Ltd”. For a LLC formed in Wales, the name can end with the Welsh word “Cyfyngedig” or abbreviation of “Cyf”.
Private Limited Company Defined
A Private Limited Company is defined as:
• is a separate legal entity than the owners;
• The finances are separated from personal ones; and
• The profits are kept after payment of taxes.
Shareholders liability is limited to the value of their total shares.
Applications for registering a new LLC are made with the government’s Companies House.
Applicants must select a unique company name, obtain a company address, appoint one director, provide details of the company’s shares and have at least one shareholder, and select the proper SIC Code identifying the appropriate industry classification. In addition, the shareholders must create written rules called the Articles of Association with a Memorandum. Finally, describe those individuals who maintain significant control over the company (those holding more than 25% of the shares or voting rights). The LLC can be registered online, by mail, or by using an agent.
After registering, the government will issue a “Certificate of Incorporation” which verifies its legal existence and contains the formation date and company number.
Within 3 months of the date on the “Certificate of Incorporation”, the new LLC must register for the Corporation Tax which can be performed online.
Every company is required to have a registered company address in the UK in the same country where the LLC is registered, such as in England or Scotland.
Directors and Company Secretary
Every LLC must have at least one director who runs the company which can be a natural person over 16 years old. If there is more than one director at least one must be a natural person while the others can be companies. A shareholder can be the director. Directors are legally responsible for the LLC. The names and addresses of the directors are part of the public records with the Companies House.
A Private Limited Company is not required to have a company secretary. However, if one is appointed the secretary can be a director but cannot be the company auditor or currently in bankruptcy.
Most LLC’s are “limited by shares” meaning they are owned by the shareholders who hold specific rights. Such rights may include voting and agreeing to company changes. A single shareholder owns the LLC. There is no maximum amount of shareholders.
Shares can have any value even as low as £1which limits the shareholder’s liability to the amount of shares value.
When registering the LLC, information about the shares (known as a ‘statement of capital’) must be provided to the Companies House. This includes:
• The company’s “share capital” which is the number of shares and type the company has and their total value; and
• The names and addresses of all shareholders – known as “members” or “subscribers”; and
• The “prescribed particulars” which are the rights each type of share class each shareholder has including:
(a) Share of dividends;
(b) Voting rights and number of votes obtained; and
(c) If shares can be redeemed (exchanged) for money.
Memorandum and Articles of Association
The “Articles of Association” are the written rules regarding how the LLC will be run as agreed upon by the directors, company secretary, and the shareholders.
A “Memorandum of Association” is a document signed by the initial shareholders agreeing to form the LLC.
Every LLC must register for the Corporation Tax with the HM Revenue and Customs (HMRC). Since April 1, 2016, the Corporate Tax rate for profits is 19%. Even if the LLC has no taxes to pay or records a loss, a Company Tax Return must be filed at the end of every year. The deadline for filing the tax return is 12 months after the end of the last accounting period.
Besides the Corporation Tax, there are Value Added Tax (VAT) and Capital Gains Tax for the business.
Annual General Meetings
Private Limited Companies are not required to have an annual general meeting. However, 5% of the shareholders can call for a general meeting by written notice at least 14 days before the meeting. Ordinary meetings can be called by the directors at any time with at least 14 days prior written notice before the meeting occurs.
Minutes of all meetings are required to be recorded during each meeting.
The following records are required to be maintained:
• Detailed records of directors and secretaries in the LLC.
• Detailed records of the number of shares held by every shareholder in the LLC.
• Detailed records showing loans and other liabilities that the LLC has.
• Detailed records showing directors’ interests upon LLC registration, with later updates.
• Detailed records of the residential address of every director in the LLC.
Everything filed with the Companies House are available for public inspection.
Shelf companies for a LLC are not available to purchase.
Form a UK Private Limited Company (LLC) Conclusion
UK Private Limited Companies enjoy several benefits like: limited liability, simple registration, only one shareholder and director are required, no minimum share capital, no required meetings, secure political and legal systems, and English is the official language.