What is a private limited company?
An important factor to consider when you decide to open a business is the legal structure of your business. As you may know that setting up a private limited company is a very popular way to start running a business in the UK. A private limited company is often a small business. Private limited companies have limited liabilities.
Advantages and disadvantages of a private limited company
There are a number of advantages and disadvantages of a private limited company as follows:
Advantages a private limited company
A private limited company is a legal entity. It must have its own business bank account and its finances are in fact separate from those of its shareholders.
Perhaps, the most important advantage of a private limited company is the limited liability. With a limited liability, shareholders can protect their personal wealth. Where necessary, someone can sue a company, but not its shareholders.
It is relatively easy for a limited company to raise finance. The sale of shares and bank loans are often used to raise finance for a company.
A private limited company has indeed an unlimited life span. It does not cease with the resignation or death of its directors or shareholders.
Disadvantages of a private limited company
While there are a number of advantages as discussed above, a private limited company has certain limitations as well. For example, as a legal entity a private limited company has a number of obligations. It has periodic filing obligations and must pay the required fees.
A private limited company is more costly to set up than a sole trader. In addition, the accountant’s fees to file the company’s annual returns and others need to be taken into account as well.
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The article publication date: 11 March 2018
GOV.UK (2018) Starting a company, available at https://www.gov.uk/topic/company-registration-filing/starting-company (Accessed 10 March 2018)
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Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.