Formation Company & Tax Advisory

Monday, July 16, 2018

Private Limited Company – LTD o LIMITED

The establishment of a limited liability company, "Private Limited Company - LTD or LIMITED", allows members to create a Legal entity which is distinct from the personality of the individual members. It is about, therefore, an -Incorporated company - i.e. an entity with Legal personality. The consequence of what is written above is that the responsibility for debts incurred by the company burdens only itself, not the Legal personality of Director/s and Shareholder/s.

LTD or LIMITED:

  • They can not ask for the Stock exchange listing.
  • They need only one Director.
  • They do not have an obligation to file a provisional report to validate a proposal for a payment of an interim dividend.
  • They may be authorized to file a simplified accounting at the Companies House.
  • They are subjected to a smaller number of rules on advertising of buyers for their actions.
  • As a rule, they belong to a few members who do not intend to offer the mass the opportunity to subscribe to part of the capital or to buy actions.

Since the issuance of shares is rarely required by a foreign-owned company, unless there is the will/need to give the firm a high-profile, LTD LIMITED is the preferred formula by foreign investors.

Three fundamental requirements are essential for its establishment:

  • A Place of Business o Branch in the United Kingdom.
  • Minimum one Shareholder.
  • Minimum one Director which may be the same Shareholder if he is an Individual.

Given the above, LTD or LIMITED is the right choice if a person wants to work in an EU member State through a branch office of the company incorporated in the UK or to operate exclusively in the territory of the member State of the EU without carrying out any activity in the UK. The following list clarifies a few circumstances where a LIMITED LTD do not represent a solution for fiscal optimization and strategic management of resources.

You have to comply with the legislation of the Country of residence, unless this is the United Kingdom:

  • Provision of services closely linked to the territory (activities carried out at houses as works of maintenance, repair or delivery service, and so forth).
  • Conducting a business whose activity is within the Country of residence.
  • Trading goods and services where human resources are employed and need to be registered with the authorities.
  • Doing all kinds of activities that identify customers and their consumption and take place only within the Country of residence.

If the company falls into the category listed, although it is an LTD or LIMITED, will not benefit from more favorable English tax rules but opting for:

  • GOING INTERNATIONAL AND OPTIMIZING DIVIDENDS TAXATION: In this case, after careful consideration, we suggest to create a structure composed of one LTD or LIMITED Company that owns property of a second subsidiary or branch operating in another Country. The branch or subsidiary will be under the local Legislation for its work, but the distribution of dividends will be made in the UK under the tax rules of the Country. In any case, by Bright Business Consulting LLP's suggestion, the best case studies and resulting solutions will be evaluated.
  • BUSINESS ON LINE: the condition is to be evaluated properly, but we can establish as a general principle to be a situation in its own right. One must be able to manage the operations of the company that develops "online business" from the UK. Anyway, through Bright Consulting Business Consulting LLP, the best case studies and resulting solutions will be evaluated.

How are tax in the UK and the distribution of dividends of LTD or LIMITED handled?

A LIMITED or LTD in the UK has to pay corporate taxes that are applied on profits, the percentage of this tax, which is by the way the only tax on profits that LIMITED or LTD is subjected to, which is fixed today at 21%.
This reflects precisely the setting of UK tax system that favours entrepreneurship and business development in general. The tax is due whether one opts to leave the profit within the company or one decides to distribute it to Shareholders. When profits are distributed, such amounts will be then taxed in the Country of residence of the Shareholder according to the income brackets provided by the Country. The British Government will not disclose the Country of residence of the Shareholder the amount of dividends received, therefore their withdrawal must be declared by the latter.

LTD or LIMITED can belong to two types:

  • LTD OR LIMITED - BY SHARES (Limited Liability Company by Shares): the Shareholders are responsible for the nominal amount of the shares and normally they are fully paid by them when they are issued. As a result, if the company is wound up and especially during insolvency, the same will be liable for debts incurred by the social assets. It should be marked that these companies are required by law to make certain information public and available for public inspection.
  • LTD or LIMITED - BY GUARANTEE (Limited Liability Company by Guarantee): the responsibility of each Shareholder is limited to the guarantee he provided. Generally this kind of business is a non-profit organization. It is preferred by whoever does not want to pay right at first the number of shares subscribed for and they are willing to give up distribution of profits.

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