In the UK, many start-up setups choose the structure of a privately limited company to operate their business activities. Unlike the case of partnerships or sole trading, operating through a private limited company will give you the benefit of being a separate legal entity, and it has its rights. However, there are complex tax obligations, and this structure works differently. The primary difference between a private limited company and other business structures in the UK is that a limited company has a solid status according to UK law. Most private limited companies are considered small business structures because they have no minimum capital requirement. Moreover, many people also enquire who owns a private limited company. This guide is designed to cover all the fundamentals regarding a private limited company and who owns it.

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Who Owns a Private Limited Company?

In simple words, shareholders are known to be the owners of a private limited company in the UK. Each shareholder has a certain number of shares in the company. This also explains that you are capable of setting up your own private limited company in the UK. Either you can have all the shares yourself, or you can have other shareholders with you who will have a certain number of shares in the company. To be a shareholder of a private limited company in the UK, you will have to buy at least one or more shares of the company. Once the business is incorporated, the shares can be issued by the company. The one shareholder who will have more shares will enjoy owning a larger part of the company.

Who Runs Limited Companies?

Several people often get confused about the structure of a private limited company and enquire who runs it. Well, directors are known to be the individuals who are responsible for running a private limited company in the UK. They are company officers who play the role of managing the company’s everyday operations. Moreover, the directors can also be the shareholders of the same company. It is a compulsion to have at least one director when you’re running a private limited company. There is a possibility of having more than one director. Most of the company owners are interested in being the director as well.

What are the Benefits of a Private Limited Company?

Once you understand who owns a private limited company, you should know there is a range of benefits when a business is operated through a private limited company in the UK. This includes the following factors.

1- Raising capital

A private limited company can raise capital by selling the shares, this can also help to reinvest in the business and grow it. The investor’s assets will be protected in case the company fails. This works as good news to the investors as well as the shareholders. This is because the risk is limited to the amount of shares they hold in the company.

2- Protect your business name

The benefit of incorporating a private limited company is that your business name is now protected and no other businesses can use it.

3- Tax efficient income

One of the most tax-efficient ways to pay yourself through a company is via a privately limited company in the UK. Make sure to do it within the legal limitations. Mostly directors and the shareholders pay themselves through the PAYE salary and later top this amount up with shareholder dividends after the corporation tax is paid. Once you have paid the corporation tax on the dividends, this amount will not be subject to NICs anymore in the UK.

4- Professional status

When businesses in the UK are operated through a limited company, the business status is seen as more professional by the clients and by the UK law as well. The primary reason is the transparent nature of the company accounts. Other businesses tend to trust the limited companies also.

5- Limited liability

The owners of the private limited company are not obliged to deal with outstanding company debts other than the amount value of their shares, it leads to protecting their assets. This includes their savings and home etc in case the business fails.

What are the Drawbacks of a Private Limited Company?

While you are sure about who owns a private limited company in the UK, you must be aware of the drawbacks that come with operating through a private limited company in the UK. Here is an explanation.

1- Setting up and closure

While you are planning to set up a private limited company in the UK, you will experience a straightforward procedure. However, you have to get registered with the Companies House and inform HMRC along with paying annual fees. Also, when you decide to close the company, you will have to request to dissolve the company, and this can take around three months.

2- Getting paid

Being a sole trader means you can take the business money and use it without any complications. However, a private limited company does not allow you to take the business money. The owner and the director will get involved and transfer the money to you, formally, making it the dividend amount or the salary. You are not allowed to use the company money as a personal amount. You will also have to get registered with PAYE to pay yourself the salary and other amounts in this regard.

3- Legal requirements

Running a private limited company comes with legal requirements like VAT returns, running payroll and PAYE, completing annual accounts and returns to Companies House, and corporation tax returns. Your company will pay a hefty fine amount in case you miss any of the deadlines with the companies house or HMRC.

The Bottom Line

In conclusion, we can say that setting up a private limited company is simple and the status of the company is better than sole trading or partnerships. People still enquire who owns a private limited company, well the shareholders are known to be the ones as discussed earlier in the discussion. While setting up a private limited company comes with a lot of benefits, there are potential drawbacks to running business operations through it. It always depends on your business type and unique needs that help to decide which business structure is best for your business operations in the UK. So, you can even talk to our experts to guide you in this regard. Get in touch today and we will offer you swift services.

Disclaimer: The general information provided in this blog about who owns a private limited company includes text and graphics. It does not intend to disregard any of the professional advice in the future as well.