Most small businesses that opt for limited company status become private limited companies rather than public limited companies (PLCs). The main differences between them are that:
- PLCs can raise money by selling shares on the stock market – private limited companies cannot.
- PLCs must have share capital of at least Â£50,000.
- PLCs must have at least two shareholders, two directors and a qualified company secretary.
- A private company limited by shares can convert into a PLC, but it will need to re-register in order to do this.
Limited by shares or by guarantee?
Private limited companies are owned by their shareholders and are limited by shares.
This means that shareholders who paid in full for their shares are not liable for the company’s debts. Shareholders who part-paid for their shares are liable for the outstanding amount owing to the company for their shares.
It is also possible to set up a private company limited by guarantee. In this case, the people forming the company – its “members” – agree on liability limits when they set up the company. This structure is often used by social enterprises to limit the personal liability of their directors and trustees.