Companies Limited by Shares | 121 Company Formation
Companies Limited by Shares
The majority of new companies incorporated in the UK are companies limited by shares (abbreviated to Ltd). This structure allows businesses that generate profits to pay their shareholders efficiently through a combination of salary and dividends. One major advantage of forming a private limited by-shares company is the limited financial liability it offers to shareholders if the company becomes insolvent. As a separate legal entity, a company limited by shares ensures that each shareholder is only responsible for the company’s debts up to the value of their shares, protecting personal finances.
Why Choose a Private Limited by Shares Company?
There are several reasons why the private limited-by-shares structure is popular among entrepreneurs:
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Single Shareholder and Director: You can incorporate with just one director and one shareholder, who can be the same person.
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Flexible Share Issuance: In England and Wales, you can issue any number of shares of any nominal value in any currency.
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Capital Raising: New shares can be issued to raise capital whenever necessary.
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Transferable Shares: Shares can be transferred to new or existing shareholders, allowing for continuity even if an owner becomes insolvent or passes away.
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Unique Company Name: Each limited by shares company has a unique name, preventing conflicts with existing companies.
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Professional Recognition: Having recognised shareholders and directors enhances the business’s credibility.
Shares and Share Capital in a Limited by Shares Company.
During the incorporation process, shares are issued to the initial shareholders."New shares can be issued at any time to raise capital, as reflected in the company's shareholder data on Companies House.".The share capital of a company is calculated by multiplying the number of shares issued by their nominal value. For instance, if a company issues 100 shares with a nominal value of £5 each, the total share capital would be £500. Unissued shares can be distributed to shareholders with their agreement, and issued shares can be transferred or sold to new shareholders.
How to Incorporate a Company Limited by Shares
Incorporating a company limited by shares with 121 Company Formation involves four simple steps:
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Choose a Company Name: Use our quick search tool on our homepage to check the availability of your chosen name against the Companies House database. This tool is free and allows for unlimited variations until you find an approved name.
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Select a Package: We offer three types of limited companies:
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Limited by Shares (including for non-UK residents)
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Limited Liability Partnership
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Limited by Guarantee
Each type comes with various formation packages tailored to your needs and budget, with options for additional services like bookkeeping.
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Submit Payment: Once you’ve chosen your package, complete your order and submit payment through our secure process using a credit or debit card, or PayPal. You’ll receive an order confirmation and invoice via email.
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Complete Your Company’s Details: After payment, fill out the online incorporation document with details such as your company’s registered address, officers, and shareholders. We will review your application before submitting it to Companies House. Typically, your company will be registered within 24 business hours, and we’ll email your statutory incorporation documents.
For more information on the registration process and to explore how forming a company limited by shares can benefit you, visit our
company registration UK
page. Additionally, learn more about your ongoing obligations with our
confirmation statements
service.
FREQUENTLY ASKED QUESTIONS
When deciding between being a sole trader and a company limited by shares, it’s essential to understand the key differences. A sole trader is a self-employed individual who must register with HMRC for self-assessment for income tax and National Insurance (NI) contributions. While sole traders enjoy full ownership of their business assets, they are fully liable for all business debts.
Sole traders benefit from fewer regulatory requirements, as they do not need to file detailed accounts or other statutory documents with Companies House. Consequently, there are no public records of their business operations, offering a degree of privacy from competitors.
In contrast, companies limited by shares must file comprehensive details about their shareholders and directors, as well as their financial status with Companies House. They are also required to register to pay corporation tax to HMRC on any profits generated.
A significant advantage of limited liability companies is that shareholders are not personally liable for the company’s debts beyond their investment in shares. This means they only risk losing the value of their shares, unlike sole traders, who risk personal assets.
One of the primary advantages of a private limited by shares company is the limited liability protection it offers its shareholders. Should the company become insolvent, personal assets remain protected, unlike for sole traders who face full financial responsibility for their business debts.
The directors of a company limited by shares hold the responsibility of submitting various documents to Companies House and HMRC regularly. This includes annual accounts, confirmation statements, and other compliance documentation.
