What is a private limited company by shares?


vertice services presents what is a

private limited company buy shares a

private company limited by shares is a

legal structure or better it is an

organization that you can set up to run

your business a limited company has its

own rights and duties for everything it

does and its finances are separate from

your personal finances this means that

the shareholders responsibilities for

the company are limited to the value of

shares that they own but haven't paid

for if the company goes bankrupt the

directors and shareholders aren't

responsible for the debts of the company

as long as they haven't broken the law

in order to register a private limited

company buy shares you must have at

least one director and one shareholder

the director is an office holder and is

the individual responsible to try and

make the company a success using their

skills experience and judgment the

director can also be an employee working

daily in the business which means he can

have a salary alternatively the director

could have no salary and work as a

non-executive director the shareholders

are the owners of the business holding

company shares and they can cash the

business profit money out as dividends

as long as the company has accumulated

profits I'll explain about the

distribution later on a private company

limited by ship is must have its capital

its capital could be seen as the total

money invested in the company by the

shareholders and the company capital is

always divided into company shares let

me give you an example a hairdresser

called Ameen wants to open a hairdresser

salad and called all you need is love

Limited let's say for instance that the

hairdresser wants to invest ten thousand

pounds in her business she can divide

ten thousand pounds of investment in ten

thousand shares of one pound H if she

doesn't have any partners she will hold

all the ten thousand shares so let me

summarize the ways you could cash the

money out of a limited company

what if you're a director you could cash

the money out as salary too if you're a

shareholder you could cash the money out

as dividends 3 you can also lend money

to the company as a loan and the company

needs to pay you back as a loan

repayment for you can invest money in

the company as capital but you can only

cash the money out eventually when you

sell your company shares partially or

totally once you've sold the business to

somebody else a limited company must be

registered in Companies House after 12

months of registration you must submit

your company accounts to Companies House

and HMRC a very simple version of your

company profit and loss should be like

this total sales - total costs and

expenses equals total profit a private

limited company buy shares needs to pay

corporation tax of 19% of total profit

the corporation tax must be paid nine

months after one year I'm not sure if

you understood but the corporation tax

must be paid 21 months after the company

was incorporated now the shareholders of

the company must make a decision if the

total profit after tax will be kept as

retained profit in the company for any

possible eventuality or reinvest back

into the company or they can cash the

money out as dividends let me give you

an example let's say for instance that

in her first year trading all you need

is love limited had total sales of

70,000 pounds and total business costs

and expenses of 30,000 pounds the total

profit for the year is 40,000 pounds all

you need is love Limited will need to

pay seven thousand six hundred pounds in

corporation tax the total profit after

tax is thirty two thousand four hundred

now a Meanor the shareholder of the

business must make a decision if she

wants to cash the money out as dividends

or keep the money as retained profit

let's say Amina wants to cash twenty

thousand pounds to pay her personal

bills and wants to keep 12 thousand four

hundred pounds as retained profit let me

show you the concept of not having mixed

personal and company finance

responsibilities and duties let's see

the profit and loss again from total

Saif is down to retained profit the

money has always been in the company's

possession and responsibilities now as

soon as the total profit after tax is

distributed to the shareholder as

dividends the money is in the possession

of the shareholder and this income as

dividends will be taxed before I go into

more detail about dividends taxation let

me explain a little more about dividends

there are two kinds of dividends interim

and final interim dividends means that

you can cash the money out on a monthly

basis final dividends means that you can

cash the money out at the end of the

financial year the shareholder could

catch the money out as interim dividends

plus final dividends it is not either

one or the other

coming back from dividends taxation

Amina must declare her dividends in her

self-assessment tax return every year

and pay tax accordingly in the financial

year 1718 dividends will be taxed as

follows the first five thousand pounds

is tax-free

from zero to thirty three and a half

thousand pounds you pay 7.5% from thirty

three and a half thousand to one hundred

and fifty thousand pounds you pay thirty

two point five percent more than one

hundred and fifty thousand pounds

you pay thirty eight point one percent

Amina's dividends tax liability will be

total dividends cash out of twenty

thousand pounds minus five thousand

pounds which is tax-free equals fifteen

thousand pounds seven point five percent

of fifteen thousand equals one thousand

one hundred and twenty five pounds and

that's how much she will pay now let me

give you a few vertice services tips one

always keep control of your business

income and expenses to please do not

submit your accounts delay the company

will be fined and it could lastly be

struck off from company's house three

the company accounts is not the only

document to be submitted to the tax

authorities you also need to submit the

confirmation statement to companies

house and corporation tax return to HMRC

for make sure you register your company

as an employer PA ye to deduct the taxes

from your employees fine your company

must register for v80 if the turnover

reaches eighty-five thousand pounds six

find an online bookkeeping solution like

the one we provide to our clients

vertice plus it's amazing traditional

accountancy as probably you know is

already old fashioned seven find a very

good accountants make sure you choose

one accountant who has the same goals

and values as you have if you want to

grow your business choose an accountant

who already grows his business in this

way he's the right person to give you

advice in how to grow your business 8

don't try to be too smart as a director

as I explained to you you could be

disqualified as a director and also

criminally prosecuted

nine always plan ahead ten enjoy your

business journey