Why set up a private limited company? After all, setting up a limited company is likely to involve more administration and higher costs than if you were a humble sole trader.
Essentially, the answer as to whether you set up a private limited company takes into account your personal financial liability. If you're a sole trader and your business fails, you're personally liable for its debts. Potentially, you risk personal bankruptcy if the debt is considerable and you can't pay it. Setting up a limited company offers protection against this.
Why set up a limited company?
A limited company is a separate legal entity and as such, legally, it's responsible for its own actions. The finances of private limited companies are entirely separate from those of its owner(s). Private limited companies can have one or more shareholders, but shares cannot be sold publicly (ie on the stock market). Public limited companies, of course, can do this.
Providing you don't trade recklessly or fraudulently, as a director of a limited company your risk of loss is restricted to money you've invested in the company. However, you're liable for bank loans if you provide personal guarantees for that limited company.
To an extent, being a private limited company might make you more credible to potential customers, partners or investors.
To register a limited company, you register ('incorporate') online. We will do this for you if you so desire. All you need do to set up a limited company is provide some basic information and a few signatures.
Ready-made limited company names are available to buy, should you wish. Alternatively, if you want to form a brand new limited company, you must send a memorandum of association, articles of association and a few forms You can use our online incorporation service instead and this will take care of all these for you.
A memorandum of association details the limited company's name, registered office and nature of business. It must be signed by the director(s) in front of a witness. A registered office is the official limited company address, which is where Companies House will send notices, letters and reminders. The articles of association set out the rules for the running and regulation of the company.
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