Private or public?
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:
- PLCs can raise money by selling shares on the stockmarket - private limited companies cannot
- PLCs must have a share capital of at least £50,000
- PLCs must have two shareholders, two directors and a qualified company secretary.
Find out more about the special rules that apply to PLCs at the Companies House website.
A private company limited by shares can convert into a PLC, but it will need to re-register in order to do so.
Limited by shares or guarantee?
Private limited companies are owned by their shareholders and are limited by shares. This means that each shareholder's liability to pay the company's debts is limited to that amount that they have not yet paid for company's shares that they own.
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.
You cannot choose a name that is the same as that of a company that already exists, and you should avoid:
- names that people may find offensive
- sensitive names
- names that are too similar to those already in existence.
To find out more about the rules on naming companies, see our section on how to choose the right name for your business
