There are a number of different corporate vehicles that you can form in the UK. When deciding on setting up a listed company, the two types of listed companies that you can choose from to start in the UK are Private or Publicly Listed Company (PLC).
What are the Differences and Similarities Between a Public and Privately Listed Company?
Private and publicly listed companies share a few of the same characteristics, these include:
Classified as separate legal entities which means that as a legal entity they can own assets and can be liable for debts in their own rights.
Incorporated companies that must be registered with the Companies House and will need to complete many of the same types of registration documents and are also regulated under the same Companies Act 2006.
The primary difference between a public and privately listed company include:
Shares of a public company are public on the stock market for trading purposes whereas a privately listed company does not.
The Directors required for each company type is only one for a privately listed company and a minimum of two for a publicly listed company.
A trade certificate must be applied for by a publicly listed company showing that they have a minimum share capital requirement of £50 000 along with other stipulations whereas there are no such rules for a privately listed company.
Public Listed Companies are obliged to have a company secretary on their company records whereas a privately listed company does not.
AGMs (Annual General Meetings) are compulsory for PLCs as opposed to optional for privately listed companies.
Account documents that are to be sent to the Companies House for Private Companies are allowed nine months as compared to the six months that are given to PLCs.
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Raising capital through a PLC is higher through the listing and trading of shares publicly. The extra capital can be put back into the business to focus on expansion costs, to obtain acquisitions, to cover development costs as well as to settle a debt.
Shareholders have the option to cash-out and reap the financial benefits thereof.
Initial Public Offerings or IPOs can boost a company's image and also its popularity on the stock market.
Stock options can be offered to employees and are seen as valuable incentives.
Shares traded publicly often have a higher value than privately owned shares.
Disadvantages of a Public Listed Company
Costly and time-consuming to prepare an Initial Public Offering
Less freedom and flexibility when it comes to implementing quick decisions as the board of directors and/ or shareholders must be consulted
Transparency is a requirement for PLCs with a high degree of importance placed on account transparency to the public.
To be able to set up a private limited company as the sole owner you must be able to meet the following requirements:
You must list yourself as both director and shareholder on your application form.
You must be at least 16yrs of age or older.
You cannot be a director who has been disqualified at any point nor can you qualify if you are currently under liquidation.
You can but don't have to be a UK resident to apply.
What are the other advantages to setting up a limited company as opposed to a Sole Proprietorship?
Your personal assets will be protected should anything go wrong with the business.
You will have more tax benefits because of having to pay corporate tax (which stands at 19%) and not current income tax (which ranges from 20% to 45%) than if you were a sole proprietorship.
As the owner of a limited company, you can receive income from dividends and a salary, both of which are taxed in their own capacity.
It is easier to acquire additional capital through funding from third-party institutions as well as in some cases through issuing shares on the stock market.
What steps should you take to start your limited company yourself?
You can choose to apply yourself or through an agent and will need to complete the following steps:
Firstly, decide if you want to set up a private or public listed company.
If you don't have the services of an agent/ in most cases an accountant, you can choose to apply yourself through the Companies House either online or manually.
What documentation do you need to form a limited company myself?
Memorandum of Association will need to be submitted which is one of the most important legal documents of a company. The Memorandum of Association must be completed in full by the director and all shareholders.
Articles of Association should also be completed as this significant document details what the rights and duties of the company’s shareholders/ directors are.
Form IN01 is also an important and necessary form that must be filled out and submitted to the Companies House. The Form IN01 lists the details of the director of the company, its shareholders, and the office registration details. It also serves as a checklist that the director has completed all the necessary steps to register a limited company.
Once you have registered your UK limited company making use of an accountant to help manage the financial aspects of your company is highly beneficial. Accountants can:
Help to reduce your tax burden by allocating the appropriate tax costs to the relevant assets to optimize company profits.
They can assist you with business planning and can help to guide your company in the right direction by averting financial threats and seizing financial opportunities that you may not be aware of.
They can help keep you informed about the latest tax regulations.
Tax regulations can change suddenly and without notice leaving directors unaware of the fact. Failure to comply with the necessary tax regulations can be legally detrimental to a company. An accountant will help you stay updated with the latest tax laws and regulations.
Accountants can offer general business as well as financial advice that can help you to make the best and most informed decisions for your business.
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***Note for U.S. citizens: US citizens are limited in their tax reduction possibilities due to FATCA and CFC laws. Opening an offshore company can increase privacy and asset protection, but you can not eliminate your taxes without giving up your citizenship. If you are a US citizen you are obligated to pay taxes on all worldwide income. Read more here about FATCA and CFC laws.