Types of Limited Company Formations

Running a business in the current volatile market scenario can prove difficult. It is not unusual to see businesses run into financial difficulties. Therefore, it is recommended that new entrepreneurs choose limited company formations over other kinds of setups, such as sole proprietorships. The primary advantage of limited business setups is that it does not jeopardize the personal assets of the owners, directors or shareholders in the event of failure. However, prior to registration, it is crucial to decide the type of limited company formation one wants to opt for.

Limited Company Formation: 4 Types

Most small or medium-sized business organizations that acquire the limited company status generally become private limited businesses. However, there are essentially four types of limited company formations:

Private company limited by shares: Most private businesses are owned and operated by the shareholders and they are limited by shares. This implies that the liability of each member and shareholder is in proportion to the individual share capital of each.

Private company limited by guarantee: Such setups do not have shares and the managing committee members stand as guarantors in place of shareholders. In case of business failure, the liability of the members is limited to the sum they have decided to contribute as company assets. This business structure is commonly used by commonhold businesses, social enterprises and charities, in order to reduce the personal liability of the directors and trustees.

Private unlimited company: Very few businesses opt to become unlimited companies, since there is no limit to the managing committee members' liability. Such companies may or may not choose to have share capital.

Public limited company (PLC): Such a company setup has a share capital, which restricts the liability of the members to the amount that remains unpaid on the shares. These companies:

• are allowed to raise cash by selling their shares on the stock market
• must possess a share capital of a minimum of £50,000 or the same amount in euros
• have to appoint two directors to run the management as well as a qualified secretary

A private company limited by shares can become a PLC only by re-registering. Naming a company is of great importance as well. Entrepreneurs must avoid names that are offensive or those that bear a resemblance to any other company name in the Companies House index.

You can complete the procedure by yourself or you can select an agent to do it for you. To use the electronic method, you will need an agent. To get the services of the most experienced agent and at the most reasonable rates, contact www.companyformations247.co.uk.