Private limited companies (ltd)

• A private limited company can be a small or large business
• Private limited companies have limited liability
• Often these types of businesses have 'Ltd' after the business name, for example, 'Green Construction Ltd'
• Any type of business can set up as a private limited company, such as a plumber, hairdresser, photographer, lawyer, dentist, accountant, or driving instructor
• The owners of a private limited company are known as shareholders
• Shareholders have to be invited by the business before they can purchase a share of the business
• A share is a portion or percentage of a company
• Private limited companies pay corporation tax, which is a tax on the profits of a business
• The business has to register with Companies House and file annual financial reports
• Advantages of a private limited company:

  • the owners have limited liability
  • it gives individuals the opportunity to be their own boss
  • any new shareholders need to be invited, which protects the business from outside influence
  • shares in the business can be sold to raise money
• Disadvantages of a private limited company:

  • there is often more paperwork
  • in some instances, other people are able to view the business’ financial information
  • it can be very time consuming to set up
  • the business may require outside professional help to manage its finances
  • shareholders will expect to receive a percentage of the profits as dividends