Private limited company (Ltd)

A private limited company can be a small or large business. A private limited company has limited liability and often these types of business have ‘Ltd’ after the business name. An example of this would be Green Construction Ltd. Any type of business can set up as a private limited company – for example, 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. Corporation tax is a tax on the profits of a business. One of the main downsides of founding a company as a private limited company is that there is more paperwork to do, because the business has to register with Companies House and file annual financial reports.

Some 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

Some disadvantages of a private limited company

  • there is often more paperwork
  • in some instances, other people are able to view the business’s financial information
  • it can be very time consuming to set up
  • the business may require outside professional help to manage its finances