Is a Limited Company a Private Company

At Towerstone Accountants we provide specialist limited company accountancy services for directors and owner managed businesses across the UK. We created this webpage for people running a company who want clear answers on tax, payroll, Companies House duties, and day to day compliance without jargon. Our aim is to help you understand your responsibilities, reduce the risk of penalties, and know when to get professional support.

This is a question I am asked very regularly, often by people setting up a business for the first time or trying to understand Companies House terminology. It usually comes up when someone sees the words limited, private, or public used interchangeably and wants a straight answer. The short answer is yes, most limited companies in the UK are private companies, but the detail behind that answer matters, because not all limited companies are the same and the differences affect ownership, reporting, funding, and responsibilities.

In this article I am going to explain clearly what a limited company is, what a private company actually means, how private limited companies differ from public limited companies, and why this distinction matters in practice. I will also cover common misunderstandings, how Companies House uses these terms, and what it means for you as a director or shareholder. I am writing this as a chartered accountant who works with UK companies every day, and everything here reflects real world UK practice rather than theory.

What a limited company actually is

A limited company is a business structure that exists as a separate legal entity from the people who own and run it. This legal separation is the defining feature of a limited company and it is what gives rise to limited liability.

In practical terms, this means:

• The company exists in its own right
• It can own assets
• It can enter into contracts
• It can make profits or losses
• It can owe money

The company is responsible for its own obligations, rather than the individuals behind it, provided it is run properly and within the law.

The word limited refers to limited liability, not to size or privacy. This is an important point that is often misunderstood.

What limited liability actually means

Limited liability means that the financial risk to shareholders is limited to the amount they have invested in the company, usually the value of their shares.

In most normal trading situations:

• Shareholders are not personally responsible for company debts
• Personal assets are protected
• Losses are contained within the company

This protection is not absolute. Directors can still be personally liable in cases of fraud, wrongful trading, or where personal guarantees have been given, but limited liability is still a major reason people choose this structure.

What the term private company means

In UK company law, a private company is simply a company that does not offer its shares to the public. It does not mean secret, hidden, or informal.

A private company:

• Has privately held shares
• Cannot sell shares to the general public
• Is usually owned by founders, family, or private investors

This is why the vast majority of UK companies are private companies. Most businesses do not need or want public investment.

So is a limited company a private company

In most cases, yes. When people refer to a limited company in everyday conversation, they are almost always talking about a private limited company.

A private limited company is usually shown as:

• Limited
• Ltd

at the end of the company name.

These companies are private companies with limited liability.

However, there is another type of limited company, which is where confusion often arises.

The difference between a private limited company and a public limited company

Both private limited companies and public limited companies are limited companies, but they are not the same.

The key difference lies in who can own the shares and how those shares are offered.

Private limited companies

A private limited company:

• Cannot offer shares to the public
• Has shares owned privately
• Has fewer regulatory requirements
• Is simpler to run
• Is the most common UK company structure

This structure is used by small businesses, family companies, startups, and many established SMEs.

Public limited companies

A public limited company, often shown as PLC, is very different.

A public limited company:

• Can offer shares to the public
• Can be listed on a stock exchange
• Must meet higher reporting standards
• Must have a minimum share capital
• Is subject to stricter regulation

Large household names and listed businesses are usually public limited companies, but they represent a very small percentage of UK companies overall.

Why most limited companies are private

The reason most limited companies are private is simple, public companies come with far greater complexity, cost, and scrutiny.

For most business owners:

• Public investment is not needed
• Control is important
• Administration should be manageable
• Privacy around ownership is preferred

A private limited company offers a balance of protection, credibility, and simplicity that suits most trading businesses.

How Companies House categorises companies

Companies House categorises companies based on their legal structure.

You will commonly see descriptions such as:

• Private limited company
• Private company limited by shares
• Public limited company

The phrase private company limited by shares is the formal legal description for most Ltd companies.

This confirms two things:

• The company is private
• Ownership is represented by shares

What does limited by shares mean

Limited by shares means that the company’s owners hold shares and their liability is limited to the amount unpaid on those shares.

For example:

• A company issues one £1 share
• The shareholder has paid £1
• Their liability is limited to that £1

This is the most common form of limited company in the UK.

Are there limited companies that are not private

Yes, public limited companies are limited companies, but they are not private companies.

This is why the correct answer to the question is a limited company can be private, but it is not always private. In practice though, when someone asks this question, they are almost always referring to a private limited company.

Is an LLP a private company

This is another area of confusion.

A Limited Liability Partnership, or LLP, is not a company at all, even though it has limited liability and is registered at Companies House.

An LLP:

• Is a partnership structure
• Is taxed like a partnership
• Has limited liability
• Is not a private company

The word limited appears in both, but the legal and tax treatment is very different.

Why the distinction matters

Understanding whether a company is private matters for several reasons.

It affects:

• Who can own shares
• How investment can be raised
• What reporting is required
• How transparent ownership is
• What governance rules apply

For example, a private limited company cannot suddenly sell shares to the public without changing its structure.

Ownership and control in a private limited company

One of the advantages of a private limited company is control.

Because shares are not publicly traded:

• Owners control who can buy shares
• Transfers are usually restricted
• Decision making is more contained

This makes private companies particularly suitable for owner managed businesses.

Privacy versus public disclosure

Although private companies are called private, this does not mean their information is confidential.

Private limited companies must still:

• File accounts with Companies House
• File Confirmation Statements
• Disclose directors and shareholders
• Maintain PSC registers

The difference is not secrecy, but the absence of public share trading.

Tax treatment of private limited companies

From a tax perspective, being private does not change how Corporation Tax works.

A private limited company:

• Pays Corporation Tax on its profits
• Is separate from its owners for tax
• Allows profits to be retained or distributed

Directors and shareholders are taxed personally on what they receive, such as salary or dividends.

Why people often confuse the terminology

The confusion usually arises because:

• The word limited sounds restrictive
• The word private sounds informal
• Ltd is used casually in conversation

In everyday language, limited company and private company are often used interchangeably, even though technically not all limited companies are private.

Is every private company limited

In practice, almost all private companies in the UK are limited by shares.

There are other structures, such as companies limited by guarantee, often used by charities or clubs, but these are still private companies.

They:

• Do not have shareholders
• Have members instead
• Are still private companies
• Still offer limited liability

Do private limited companies look more professional

Many people choose a private limited company because of perception.

In the UK:

• Ltd companies are often seen as more established
• They can improve credibility with clients
• They are often expected in certain industries

This does not mean other structures are less valid, but perception does play a role.

Common misconceptions I see in practice

The most common misunderstandings include:

• Thinking limited means small
• Thinking private means secret
• Assuming all limited companies are the same
• Believing Ltd companies pay less tax automatically

Clearing up these points helps business owners make better decisions.

Is a private limited company always the right choice

Not always. While most limited companies are private, that does not mean this structure suits everyone.

It works well when:

• Limited liability is important
• Profits are growing
• There is business risk
• A scalable structure is needed

It may be less suitable where simplicity is the main priority.

Final thoughts

So, is a limited company a private company? In most cases, yes. The vast majority of limited companies in the UK are private limited companies, owned by individuals or small groups and not open to public investment. The key point is that limited refers to liability, while private refers to ownership and share availability.

Understanding this distinction removes much of the confusion around company structures and helps you choose the right setup for your business. Once you see how the terms fit together, the whole picture becomes far clearer, and far less intimidating.

You may also find our guidance on what is a private limited company and what is a limited company helpful when exploring related limited company questions. For a broader overview of running and managing a company, you can visit our limited company hub.