Registering a private limited company is more complicated and expensive than setting up an enterprise as a sole trader. But, choosing to set up a private limited company provides great protection than being a sole trader which is why most people prefer to set up their business as an incorporate limited company. This is because of the several benefits it offers such as deduction in tax, liability protection, or personal financial liability.
For example, if you set up your business as a sole trader and in case if it fails, then you are personally responsible for all debts. Whereas, if you register a private limited company, then it protects you from any debts.
Setting up a private limited company
A business owner can set up his company as a private limited company. It means the business:
- has separate finances from its owners
- liable by itself for all actions
- is legally separate from the members who handle it
- can have more than one shareholders
- can keep earnings for the further development after paying all taxes
- the director of the company can be its shareholder
- shares can’t be sold publicly
What do you require to set a private limited company?
To set up your business as a private limited company in the market, firstly, you need to register with the Companies House. This process is known as incorporation. Things you require:
- A valid name for the company
- Suitable address for the company, for example, if you want to set up your business in London then you must have a specified London business address
- Must have minimum one director or manager
- Verify your SIC code (determines what your business is about)
- Company’s shares details (should have minimum one shareholder)
- Details of the members with specified and compelling rights, for example, a member with more than 30% shares and voting rights
What duties do private limited company directors have?
As you know, a private limited company must have minimum one director at a time. Their key responsibilities are as:
- A director is responsible for handling all day-to-day activities of the business.
- Apply powers only for the reasons they were given, no misuse.
- Duties to avoid conflicts of interest
- They are responsible for submitting the reports related to any change in the company’s structure to the Companies House.
- Responsibility to explore the business and make it a huge success
- Duty to avoid any profits from the third party
These are some important points you must consider to set up an incorporate limited company. Remember that the company address you submit should be the official address. Because all important documents including letters, notices, and reminders by the Companies House will be sent to this registered address.
In short, private limited companies can be the most trustable and powerful entity for small, medium, or large businesses. With their great contribution in the capital, they have become a major part in the development of any economy.
When you compare a private limited company with a public limited company, you will see its real benefits. It is comparatively less time-consuming and inexpensive. Undoubtedly, private limited companies have become the most important businesses not only in the UK but in the whole world.