Sample Article – Pros and Cons of Forming a Private Limited Company

Please find below a sample blog post written for a business formation  services company website:-

The UK Private Limited company is a company that is limited by shares. This type of UK Company, often simply referred to as a Limited company, cannot be publicly traded and is the most common type of incorporation in the UK. Private Limited Companies can easily be formed online using the services of licensed company formation agents and third party lawyers or accountants, or be formed directly through Companies House. Limited company formation is usually more affordable when done through specialist company formation agents, especially when done online.

To register a Limited Company, you first need a name (which must end in Limited or Ltd), you can check if the proposed name of your limited company is available via an online search which takes just seconds. Then if the name is available, you just need to pay and submit your order along with the details of officers, share designations, capital, proof of ID/address etc. Most online company formation agents will also offer a number of other services as part of a package at this stage, but the entire process of UK incorporation itself is pretty simple. Once order is completed, within a few days you should receive a Certificate of Incorporation, plus the The Standard Model Articles of Association, Memorandum of Association stating the name of the company, giving the registered office address and the company objectives, along with with the name and signature of shareholders, and the share allocations.

The advantages of forming a Private Limited Company are numerous but you should seek professional advice before making any decisions. Typical reasons individuals choose to register private Ltd companies include:

  • A Private Limited Company’s finances are separate from its owner’s finances
  • Protection from personal liability
  • Added credibility which can make it easier to borrow money, raise capital and achieve financing
  • Private Limited Companies have an unlimited life and do not cease with the death of a director or shareholder
  • Private Limited Companies may offer additional tax benefits

However, Private Limited Companies are not for everyone. there can be disadvantages such as:-

  • being required to hold annual meetings and observe specific formalities
  • More expensive to set up than a sole trader or partnership
  • Annual fees and have filing obligations
  • Less personal control over the company due to compliance issues
  • A more complex business structure

Private Limited Companies must have a Company Director, but a Company Secretary is no longer obligatory. All company officers are formally appointed in the Private Limited Company’s Articles of Association and it is common practice for Ltd to have more than one director. In cases of multiple directors then at least one of the directors must be an individual, but other directors can be individuals or corporations. When you form a Private Limited Company, at least one share must be issued but the company can be created with any number of shares to any value. The first accounting period starts on the day of incorporation so accurate books and accounts must be maintained from day one and full financial statements must be filed with 9 months after the end of the financial year. All private limited Companies must have a registered office in their country of incorporation but this does not have to be the business address, though all company official letters should clearly show registered office address.

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