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Limited Companies

There are 4 main types of company and all of them have to be registered at Companies House. Each has the same basic requirements but they have different uses and different parts of the legislation that relate to them. They are all governed by the Companies Act 1985 (as amended by the Companies Act 1989 and further amendments), and this is done by a set of documents called a Memorandum and Articles of Association. The Companies Act 2006 is a new piece of legislation which is coming into force over a period of time, so until October 2009 when all aspects of the new act have been implemented, companies will still be governed by the 1985 Act and amendments as well.

The types of company are:

Private Limited Company where the liability of the members is limited to the amount of unpaid shares they hold. This can be a single member company.

Private Unlimited Company – the members’ liability is not limited and therefore it does not offer much protection. This type of company must have at least two members.

Company Limited by Guarantee in this case the members’ liability is limited to the amount they have agreed to contribute to the company’s assets if it is wound up. The members of an LBG are not shareholders and therefore do not get dividends in return for their investment. This type of company is usually used by charities and non-profit organisations.

Public Limited Company (PLC). The company’s shares may be offered for sale to the general public and the members’ liability is limited to the amount of unpaid shares held by them. This type of company uses the initials PLC after its name and is the only company type, after it complies with certain rule sets and regulations that can offer its shares for sale to members of the public via the stock exchange.

Members of companies, except those limited by guarantee, are shareholders of the company and are allowed to be paid dividends out of profits made. Shareholders are not normally involved with the day to day management of the company as this is carried out by the officers of the company known as directors and company secretary. However in small companies at least some if not all of the shareholders and directors are the same individuals.

Companies are separate legal entities and are taxed in their own right. They are covered by a tax called Corporation Tax and this is a tax on profits that the company makes. Personal shareholders pay tax on any dividends which are paid to them at their own personal tax rate. Directors and any Company Secretary are considered employees of the company and pay Tax and NI in the same way as any employee would. All companies mentioned in this group have annual obligations such as filing annual accounts and an annual return with a filing fee with Companies House.

Once you have decided on the structure for your business then you need to come up with a name or trading title.

See Naming Your Business for guidance on this.

See Also:

Preparing For Business

Photography Business Topic Section


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