Private Company....limited by shares or limited by guarantee?

[lurkylou]

Can someone explain this please?

You can have private companeis or public companies. Only public companies can list on certain stock exchanges, but they do also have slightly different filinf requirements.

Companies have limited liability - or specifically the owners of companies have limited llibility. In the case of copanies issues by shares, then the liability will be limited to the share capital. For a company limited by guarantee then the directors or trustees will have a small guarantee to honour. Ime most companies limited by guarantee are in fact charites/resident associations rather than commercial ventures. Both types of company have similar filing obligations, thouhg with companies limited by guarentee there isn't the same type of ownership.

Thanks for that.

Why would I need to be a private company rather than a sole trader??

Keep getting advice to go for private company but what is the minimum financial guarantee??

The thing about being a sole trader is that say (a) you do something bad by accident and get sued or (b) you incur debts that are greater than your income, then you are personally liable. So your house could be at risk from your business debts, for example.

Having a company limits your personal liability to the amount of the assets actually owned by the company.

You don't need to have a financial guarantee. You just invest a reasonable amount of share capital - whatever is necessary to get you going commercially.

The thing is - in return for limiting liability, companies have to be audited, and you have to file accounts for public examinsation at companies house.

Thanks - what is a reasonable amount???

Well limited liability is one reason for setting up a company - if things go wrong then it is not your house at stake etc. And companies are taxed in a different fashion from individuals, so it may be advantageous. If you are setting up a business then the incorporated route would typically be a Private company limited by £100 shares, but it does of course depend on what your company is hoping to do. If you're looking for bank loans then the bank will expect you to put in more cash into the company (otherwise their money is at risk and not yours!).

It is not always better to be incorporated though, and you do have to produce annual accoutns etc. Your accountant should be able to advise you.

Well this is not my field, you understand but as far as I know there aren't any minimum capital requirements for an ordinary limited company (although there are for Public Limited Companies or PLCs).

As far as I know you can set one up for a couple of quid. But bear in mind the company will need to buy things. Things like stationery, whatever it is you plan to trade with blah blah. So it will need a bit of cash.

Think of the company as being like a separate person.

You could always loan the company some money but that has various tax and legal implications. Have a chat with an accountant.

yes, I suppose I will have to wait until the end of the month when I'm back in the UK to get the bad news!!

The business will only have a postal address - no premises or equipment bar my laptop and fax!! So how many £100 shares would be necessary??

A figure near the amount I could be sued for??

Sorry - didn't mean to confuse, but most off-the-shelf companies seem to be 100 x £1 shares (so £100 in total).

Do bear in mind that your future customers will be able to look up company details. This may be a consideration for you, as I wouldn't say pay £2k over to a company which only had £100 share capital. But I suspect many customers don't check all of the people that they do busienss with...

I think LM meant 100 £1 shares. You could of course have thousands of them but it sounds as though you actually could survive with quite a small share capital.

Sorry xpost - there is an eerily similar thread title about selling shares ...