Limited by Shares

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What is a company limited by shares?

It is a company owned by shareholders, in which their liability is limited to the value of the shares taken in the company. Therefore, the shareholders personal assets are almost always protected in the event of the business failing.

Who would form a limited by shares company?

This type of company is good for individuals or a group of people and/or companies who want to trade without the risk of personal liability should the business run into trouble. It is also a good company structure for those wishing to add credibility to their business, raise additional capital or take advantage of more favourable tax benefits.

How many people are required to set up a company limited by shares?

It is a legal requirement of company formation to have at least one shareholder and one director. Both roles can be filled by the same person, which essentially means you can register a company on your own. There is no statutory maximum for the number of directors or shareholders you can have, although you should check to ensure your articles don't provide a limit.

Who owns a limited by shares company?

It is owned by shareholders. Limited by guarantee companies are owned by guarantors, and limited liability partnerships are owned by 'partners'.

What are the benefits of setting up a limited by shares company?

The main advantage of a limited by shares company formation is the limited liability of its members (owners), who are able to share profits without personal liability for company debts. In addition to limited financial risk, limited companies also enjoy a range of tax benefits, are able to raise capital by selling company shares and an elevated corporate status. Limited by shares companies are also subject to perpetual succession, which means they will continue to exist even in the event of an owner’s death or a transfer of shares.

What are the tax benefits of forming a limited by shares company?

The corporation tax payable on limited company profits is lower than the higher rates of income tax payable by sole traders and partnerships. In addition, although directors are paid a salary that is subject to income tax and NI payments, a limited by shares company director can utilise their personal tax-free allowance to avoid any income tax deduction. Limited companies can also voluntarily register for VAT, offering cashflow benefits by allowing companies to charge VAT on sales and claim it back on purchases.

What is the difference between a limited company and a sole trader?

By setting up a limited company, the members can protect their personal assets from being used to pay any company debts. On the other hand, a sole trader is personally liable for any debts the company may owe, because there is no distinction between company money and personal money.

What are the annual requirements of a limited company?

Every year, a company is required to submit a confirmation statement (detailing a snapshot of the current details at a certain date), a set of annual accounts (containing information about a company’s financial activity), and their tax returns.

What are the legal requirements of a limited by shares company?

All limited companies must be registered with the Registrar of Companies in the UK (Companies House). There is also a requirement to have a registered office address. This must be a physical address and not a PO Box. Details of the registered office are made available to the public. A memorandum and articles of association must also be included with each registration application, and company details should be maintained and any changes must be reported to the relevant authority.

How do I set up a limited by shares company?

It must be registered with Companies House. Rapid Formations is a Companies House e-filing partner, which means your company should be formed within 3 to 6 working hours by using one of our online company formation packages.

Please note: The vast majority of our companies are registered within 3 to 6 working hours, however, sometimes Companies House may take longer, depending on their workload.

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