The designations of limited companies
- Stock companies are owned by their shareholders. Each shareholder is only liable if it does not pay its shares.
- Members of private company limited by guarantee are not shareholders. In most cases, principals are only liable for the money or capital they contribute to the business. That is how many charities are organized.
- A company that does not have share capital and whose members are not liable can be considered unlimited.
Owner’s Liability Limited
Limited companies are separate legal entities from their owners, similar to limited liability companies in the United States. The organization protects the owners from liability. A company’s owners are not personally liable if it gets into financial trouble or files for bankruptcy. Also, shareholders of a company are not liable, unless unpaid shares are held.
Benefits of Income Tax
A limited company has several tax benefits in the United Kingdom. An individual or partnership’s director of a limited company is required to pay income tax. Employers also need to implement pay-as-you-earn systems to collect income tax and Social Security contributions from their workers.
Both earned and retained profits are subject to corporation tax, which is much lower than income tax. There is no capital gains tax on earned profits.
Requirements and Restrictions of Organization
Limited companies are required to have directors and secretaries. They cannot both be the same person. For secretarial duties, an outside party can be hired. As the company’s directors, the secretary and director must honorably represent the shareholders.
The timing of when a company can begin trading shares is unrestricted, but employees can become shareholders by purchasing stock. Investors can buy shares as well.
Extent into perpetuity
The limited company remains in existence whether or not a partner dies or resigns. A former partner’s shares can be transferred to existing partners, and the structure of the company remains unchanged. Names similar to the company’s are also protected by law.