As an entrepreneur, when you decide to form a company, one of the first things you will need to do is to choose your company formation type. If you know that you want to form a limited company, you will need to determine whether a private or a public limited company is best. Limited companies in general offer a number of advantages to business owners. One of the main benefits is that limited companies offer protection from liability for business debt. There are four different types of limited companies. These include private companies, private companies limited by guarantee, private companies unlimited and public limited companies. Your job is to determine which of these best suits your business needs.
Both private limited companies and public limited companies are owned by shareholders. The shareholders make investments in the company, and the type of company formed decides the limits of those investments. All limited companies are bound by certain regulations and guidelines that are set forth by Companies House. These regulations must be adhered to in order for the company to remain compliant and permitted to trade.
Private limited companies are only required to have one shareholder and this shareholder may also act as the company director. The overall requirements for a private limited company are must less strict and there are no specific regulations for having a company secretary. Private limited companies however, are not permitted to put up shares in the company for public sale. Public limited companies may do so if they wish to raise additional capital and a public limited company is required to have at least two directors.
Private limited companies can submit accounts up to nine months after their accounting year has ended. A public limited company however, only has six months to submit these accounts. There are other differences in the two company structures as well. Private limited companies can begin trading instantly after they have been incorporated. A public limited company however, must wait until they have received their trading certificate before they are legally permitted to trade.
Private limited companies are not required to have a company secretary and if they do choose to have someone act as the company secretary, this person does not have to be qualified. A public limited company however, must appoint a secretary and this person has to be qualified in order to be appointed.
Public limited companies do offer a number of advantages, not the least of which is the ease of raising capital by offering company shares to the public. Shareholders in these companies have much more freedom in buying or selling shares. There are of course, stricter criteria for public limited companies. Company directors cannot be older than 70 years of age and they are not permitted to hold this position if they have been disqualified from doing so by court. Residency issues may also arise for company directors in public companies.
Forming a limited company can offer a number of benefits, but you must know which limited company is best. Doing a bit more research on the advantages and disadvantages of both private and public limited companies may be in order before you make your decision.