In the UK, you’re spoilt for choice when it comes to the different ways you can set up a business. Understanding the structures available to you is a vital part of starting a new venture.
But with terms such as sole traders, companies, limited, unlimited, private, and public, it’s easy to get overwhelmed.
To help, in this post we’re going to concentrate on one of the most common business structure questions: what is the difference between private and public limited companies? Let’s get started.
The key difference between private and public limited companies
The most appropriate place to start is to look at why they’re called ‘private’ and ‘public’ companies. And this is all to do with how shares in the companies are sold.
Shares in a private company can only be moved around in a private capacity, via a private sale. This doesn’t mean that the selling of shares is necessarily done in secret. What it does mean is that shares can’t be put up for public consumption through the stock exchange.
A public company, on the other hand can do just that – put company shares up for sale via the stock exchange (once it has jumped through some hoops, which we’ll touch on shortly).
So this is why they are called private and public limited companies.
Being a private limited company does not mean that you do not have to disclose information on the public register at Companies House. This is a necessity for both business structures. However, public companies have to disclose more information compared to their private counterparts.
Now let’s explore what else sets the two structures apart:
Minimum share capital
A private company limited by shares has a minimum share capital of one share worth £1, and can start trading as soon as it has been registered at Companies House (so sometimes on the same day that the application was sent).
Public companies cannot trade until they have allotted a minimum of £50,000 worth of shares, with at least one quarter of this being paid up (so a minimum of £12,500). The company must have a trading certificate – provided by Companies House – to prove this. Trading certificates are typically issued within two weeks of the application being received.
Officers of a public company can be fined if the company trades (or borrows) without a valid trading certificate.
Annual account due dates and late filing penalties
Private companies must file their annual accounts within nine months of their accounting reference date passing. For example, a private company formed on 1 August 2022 would have an accounting reference date of 31 August 2023. The first set of accounts should then be delivered no later than 01/05/2024.
Public companies have a little less time, with theirs being due within six months of the accounting reference date going by. For example, a public company formed on 1 August 2022 would again have an accounting reference date of 31/08/2023. The first set of accounts should then be delivered no later than 01/02/2024.
Whilst both structures incur a penalty for late filing of annual accounts, the penalty is heavier for public companies:
|How late?||Private Company||Public Company|
|Less than 1 month||£150||£750|
|More than 1 month, less than 3 months||£375||£1,500|
|More than 3 months, less than 6 months||£750||£3,000|
|More than 6 months||£1,500||£7,500|
The people in the company
Private companies (limited by shares) can be formed with just one person acting as the sole director and shareholder.
Whilst a private company can appoint a secretary if the directors wish, this has not been a compulsory requirement since 2008. If a private company does choose to appoint a secretary, this person requires no formal qualification.
Public companies require at least three people, with a minimum of two directors and one suitably qualified secretary (an accountant for example). Any of these people can also be a shareholder.
Annual general meetings (AGMs)
An annual general meeting is a meeting between all of the company’s shareholders in which different aspects of the company are discussed. Generally, the meeting will involve looking back over the company’s activity in the last year, developing a strategy for the next year, and, importantly, voting on particular issues.
Private companies have no obligation to hold annual general meetings. However, they can if they wish to.
A public limited company must hold an annual general meeting within 6 months of the accounting reference date having passed and must continue to do so for the lifetime of the company.
Private company names must end with ‘Limited’ or ‘Ltd’, or the Welsh equivalents – ‘Cyfyngedig’ or ‘Cyf’ (some limited by guarantee companies don’t have to include the suffix if they meet very specific criteria).
Public companies must add ‘Public Limited Company’ or ‘PLC’ at the end of their name.
But despite their differences, the company formation process is similar
Regardless of the structure that you choose to push ahead with, we can help register your company with Companies House.
For both a private limited company and a public limited company, our online process can be broken down into 4 simple steps:
1. Choose your company name
Our company name search tool can tell you immediately if your name is available or not, and if it includes any sensitive words or expressions that will require supporting documentation. If it does, we’ll be happy to assist you with this.
2. Pick your company formation package
We offer a number of packages dedicated to the private structure, including the Digital, Privacy, Professional, Prestige, All Inclusive, Non-Residents, Limited by Guarantee, and eSeller packages. Prices start at just £12.99.
If you wish to form a public limited company, take a look at our PLC Package, available for £119.99.
When making payment, you also have the option to purchase some handy extras, including the Pre-Submission Review (£4.99), whereby one of our company experts will review your application before it’s sent to Companies House, to ensure it doesn’t include any mistakes. Pick up any extras that you want, enter your account information, and then make payment.
4. Provide the company details
Our company formation process takes you through the application in the simplest way, making sure that you provide the necessary company, director, secretary (for a PLC), and shareholder information.
If any information is missing, we’ll highlight this and stop you from proceeding until the information has been entered. For example, if you are forming a PLC and you only enter the details for one director, we’ll remind you that you need to appoint two.
Once your application is complete, we’ll send it digitally to Companies House, who will typically accept it in 3 – 6 working hours. Once your company has been formed, we’ll email all the company documents to you, including the certificate of incorporation, share certificates, and memorandum and articles of association. Some packages also include printed documentation, in which case these will be mailed to you.
If forming a public limited company, we’ll also send you the trading certificate.
So there you have it, the difference between private and public limited companies
We hope you have found this post helpful.
Please leave a comment if you have any questions about private companies, public companies, or our company formation process, and we’ll be more than happy to help.