1. Overview

You can set up a private limited company to run your business.

All limited companies must be registered (‘incorporated’) with Companies House. To do this you need:

Once the company is registered you’ll get a ‘Certificate of Incorporation’. This confirms the company legally exists and shows the company number and date of formation.

Types of private limited company

The liability for debts in a limited company is usually limited to the shareholders. Exactly what liability you have depends on the type of limited company you create.

Limited by shares

A private company limited by shares is owned by its members (called shareholders). Each member’s liable for the original value of the shares they were issued but didn’t pay for.

A shareholder has 500 shares originally valued at £1 each. They have previously paid for 100 shares, ie £100. At the time the company fails, they’re liable up to the original value of shares they haven’t paid for, ie £400.

Limited by guarantee

A private company limited by guarantee means the members of the company financially back it up to an agreed amount.

Its members aren’t called shareholders.