Private and Public Limited Companies Explained

Amongst the different types of limited company, there are those which are privately owned, and those owned publicly. So what’s the difference?

Liability in public and private companies

A limited company exists in its own right, completely separate from the owner’s or shareholders’ finances. The owners or shareholders have their liability limited to what they have invested in the company.

This means that they don’t become personally liable for money that the business owes. If the company has debts, collectors can’t pursue the shareholders and owners beyond their investment in the company.

If any claims are made against the business, only company assets can be seized.

Setting up private companies versus public ones

If you set up any type of company, you must tell Companies House. Registering a company is known as incorporation, or formation. Registering with Companies House automatically notifies HMRC, ready for Corporation Tax.

You can register the company yourself, or outsource the incorporation process, for instance by using a solicitor, accountant or an agent. There are differences in what public and private companies must have in order to register, and how they operate.

Public limited company (PLC)	Private company (Ltd)
A public company must have a minimum of £50,000 in share capital.	Doesn’t require minimum share capital.
Can sell shares on the stock market to raise money for the company.	Cannot trade on stock market. The company and its shareholders can only transfer or sell shares privately.
Must have a company secretary and at least two directors, who are all different people.	Requires at least one individual to act as director, who must be at least 16 years old. This person can also be the sole shareholder. Does not need to have a company secretary.

Both set ups must pay Corporation Tax on any company profits. The directors must also register for Self Assessment, even if they only take a salary through the company.

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About The Author

Beth-Anne Bruce

I'm an experienced and fully AAT and ACCA qualified accountant, who is enthusiastic about helping business owners succeed. I also love cooking and needlepoint (at different times!). Learn more about Beth.