Common Private Limited Company FAQs: Featuring the Top 20 LTD FAQs and Answers

Ryan Patrick

Mar 29, 2024 • 7 min read

Are you looking for information before registering a limited company? You're not alone. We get a lot of questions from individuals trying to understand how limited companies work and if the option suits them. We've compiled common private limited companies' questions and provided comprehensive answers that may help you know them better.

Common Private Limited Company FAQs

Here are common frequently asked questions on limited companies.

1. What's a Private Limited Company?

A private limited company is a business which is separate from its owners. This legal entity has its assets and money, profit, and losses. Its liabilities are limited to the company. This means the director and shareholders are protected from the company's liability if it faces difficulty. This differs from a limited company from a sole trader or partnership, where company liabilities and assets belong to the company owners.

Ownership of a limited company is formed through the division of shares. The more shares you have, the higher your ownership percentage will be. Unlike a public limited company, a limited company cannot sell its shares to the public.

2. How does a Limited Company Liability Work?

Limited liability simply means debts incurred by the business are the business's own liability and not its directors or shareholders. A limited company is a separate legal entity from its members; if a company incurs debt, it is liable to settle it.

Shareholders are obligated to pay the company the shares they have taken. Once a shareholder fully pays for the share, they need not pay more. So if two shareholders incorporate a company and one takes one share valued at £1 in the company, their sole responsibility as shareholders is to pay £1 each to the company for their shares.

The director will also not incur personal liability because they are considered company agents. However, in specific situations, such as wrongful or fraudulent trading, the court may impose liability on directors despite the general principle of limited liability.

3. How is a Company Registered?

There are several ways you can register your company with the Companies House. You can register online, by post, or by a formation agent. When registering through post, you must send forms and necessary documents to Companies House.

At Incorpuk, we register limited companies electronically with the Companies House. This ensures quick registration and completion within a few hours.

4. Who can Set up a Limited Company?

Any person, UK resident or non-resident, can register a company in the UK as long as they fulfil these conditions:

They are not declared bankrupt
A court order does not retrain them
They're not subject to UK restrictions

5. What Information Do I Need When Setting up a Limited Company?

When setting up a limited company, you need this information:

A unique company name
A registered office address
A minimum of one director
A minimum of one shareholder
One secretary (optional)
Information of the director, secretary, and shareholder
Credit card details for payment purposes

6. Does Registering a Company Mean My Trademark is Protected?

No, registering a company and registering a trademark is different. Registering your company name with Companies House cannot stop another business from using your trademark. If you want to protect your trademark, you must register for a trademark, which is a separate process.

7. What's a Registered Office?

The registered office is the official address from which all statutory documents from Companies House are received. This address is available on public address. You may use a PO Box as the official address; as long as you provide the full address, the Royal Mail must also validate the postcode. This address must appear in company letters, website emails, etc. The registered office must be in the same country where the company is registered.

Although the address can be modified as necessary, it's crucial to promptly notify Companies House by submitting the correct form or via web filing.

8. How do I get a Registered Office?

If you don't reside in the UK or are a freelancer and wouldn't want your residential address placed on the public record, you can talk to Incorpuk. We can provide you with an address for your registered office. When statutory mail from Companies House or HMRC is sent to this address, it will be forwarded to your preferred location.

9. What's a Companies House?

Companies House is the UK's governmental body for registering companies. There are three branches in Cardiff, Scotland, and Northern Ireland. When registering a company, documents, forms, and registration fees are sent to Companies House. The registrar issues you the company's certificate of incorporation.

10. What Information is a Company Required to File at Companies House?

Here is the information you must submit to the Companies House

On first registration: this information may vary depending on the type of company you're setting up.
Annual return: The company must submit its annual return to Companies House annually. This return is a form document provided by Companies House, which needs to be updated with any changes and returned along with the registration fee. Nowadays, most annual returns are transmitted electronically, costing £13. The yearly return contains information already on record at Companies House, including details such as the registered office, shareholders, directors, and industry classification.
Annual account: limited companies must also register their annual accounts. Big companies must file total profits and loss accounts, balance sheets, and auditors' and directors' reports. Smaller and medium-sized companies can send annual accounts comprising fewer details.
Public record: the information registered at Companies House is open to the public for inspection. Registering this information is a trade-off for enjoying the limited liability corporate status.

11. What are the Memorandum & Articles of Association?

They are statutory documents instructing how a business is regulated and the protocol it must follow.

Since 2009, a company may have opted for the model articles of association, which were introduced as part of the Companies Act 2006. These articles provide a straightforward and well-organized structure for directors to manage various aspects of the company, including coordinating meetings, issuing shares, making resolutions, etc.

12. What are Limited Company Shares, and how do they Affect a Company?

Shares are a way of raising your company capital and help determine the percentage of control in a company. When issuing shares, deciding how to divide them among members is essential. You have over 50% of the shares to complete company control.

Since October 2009, limited companies have had to provide capital statements during registration. This statement outlines the shares' nominal value, the money, and the total value of issued capital and payments made. Shareholders' company ownership is determined by the percentage of allotted share capital they have. If you'd like to control a company, you must own more than 50% shares.

13. Can Minor Own Shares in a UK Limited Company?

There isn't a legal restriction preventing children from owning shares. In numerous family-owned businesses, children are issued shares to offer them capital assets, which may gain value after some time. This aids in long-term inheritance and capital gains tax strategies for your children. Paying dividends on children's shares can also help children's allowances be used for income tax purposes.

14. Can a Limited Company Run without a Director?

No, every limited company must have a minimum of one director during incorporation. If shareholders remove the company's sole director, or they die, shareholders must appoint a director immediately. If a company doesn't nominate a new director, Companies House can remove (strike off) the business from the company's registers.

Share certificates are receipts you receive after the purchase of every share. This information must be included in a share certificate:

Company name
Type of share you're issued
Your name and address as a shareholder
Numbers of shares you're assigned as a shareholder in words
Share value
Signature of the company's director and secretary

16. What's a Director's Service Address?

A director must provide a service address where they can receive letters and notices. This can be the business registered office or any other address. A director must also notify the Companies House of their residential address.

This address isn't included on the public record; however, the address will be available from credit reference agencies or public authorities. As a director, you must provide your residential and service address when incorporating a company. However, you may use the same address for both.

17. What's the Difference Between Shareholders and Directors?

Shareholders or members own the company and have the right to vote on diverse issues. The right of ownership and voting rights are determined by the percentage of allotted shares you own. The directors oversee the company's daily operations and ensure that it fulfils its obligations and meets deadlines. A person can be a shareholder and a director in a company.

18. Are there Documents I must Return Annually?

You must return several documents following the company's Accounting Reference Date(ARD). This is the last day of the month you register your company, and it happens every year. The day marks the end of your financial year when you must return accounts. You have a maximum of 10 months from your ARD to submit these documents to the Companies House:

Notes to company accounts
Group accounts, if necessary
Balanced sheet (signed by the director)
Profit and loss account
Director's report (signed by secretary or director)
Auditor report (signed by an auditor)

19. Must I Register for VAT?

As a limited company, you must pay VAT to HMRC if the business annual turnover surpasses the VAT threshold before 1st April 2024, £85,000, or £90,000 after 1st April 2024. However, you should note that not all products are subject to VAT. Additionally, different rates may apply.

20. When is a Limited Company Considered Dormant?

A company is considered dormant when no significant accounting transaction occurs during the accounting period. If a company is dormant, it is inactive for the Corporation tax because they are not involved in any trading activity.

This means a company cannot:

Buy or sell products or services
Purchase or rent property
Operating payroll
Pay directors salaries
Managing investments
Earning interest
Issuing members dividends
Pay bank charges

Form Your Company with Incorpuk Today

At Incorpuk, we will help you through the company formation process and file your confirmation statements to help your business stay compliant. Whether you're a UK resident or a non-UK resident, our team is ready to provide guidance and help you establish your company in the UK. Contact us here today.

Conclusion

Do you have more questions about setting up a limited company or questions on the structure of a limited company? Incorpuk is a leading company formation agent in the UK. We provide a fast and cost-effective way to register a limited company, whether you're in the UK or abroad. Contact us here today and start your entrepreneur journey today.