Most companies fall under the category of “limited by shares.” In this kind of company, individuals may purchase “shares,” or percentages of ownership. Buying more shares means owning a larger percentage of that company. These shares can be purchased at the nominal value (typically £1) or market value, which is determined by their worth.
Purchasing shares is a one-time transaction resulting in permanent company ownership. Therefore, shareholders no additional liability for the company once the transaction is complete. If, for whatever reason, an individual is granted his or her shares before paying for them, the company may collect those funds should the need arise; however, even if the market value of those shares has increased the shareholder is not liable to pay any more than he or she agreed to at the time of purchase. Therefore, when a company is “limited by shares,” its shareholders are only liable for their original investments, and their personal assets are considered “off limits” to creditors.
There are many benefits to this system, both for investors and the company. Individuals may choose to invest in “limited by shares” companies in order to participate in trading without risking their personal assets, and companies can gain credibility and attract more investors by selling shares. Doing this also allows the company to hold its own assets, including intellectual property, as a separate legal entity apart from its owners. Additionally, Company House lists “limited by shares” companies in its Register of Companies, and provides publicly accessible details on these businesses in its database. This transparency attracts both investors and suppliers, and makes it easier to claim business expenses against taxes.
There are specific naming guidelines for private companies that are “limited by shares.” A company like this is usually required to include either “Limited” (also Ltd or Ltd.) or “Incorporated” (Inc.) as a suffix to its name. However, the word “Limited” may not be used in the UK, the Republic of Ireland, nor by companies set up by the Act of Parliament. Instead, companies in the Republic of Ireland may use the word “Teoranta” (Teo), and companies in Wales may use the word “Cyfyngedig” (Cyf). The name of a “limited by shares” company is legally protected, meaning no other company may trade using the same name.