PRIVATE LIMITED COMPANY (PLC)

Private Limited Companies are suitable for start-ups, small to medium enterprises (SME’s) and even some large businesses. There is no capital requirement (other than at least one share must be issued on incorporation).

Many individuals are registering Private Limited Companies every day to protect themselves against trading losses in our ever-changing economic climate.  Because the company is responsible for its own losses and debts, the member’s own assets will be protected from creditors and their liability will be limited to the amounts due on their shares if not yet paid up.

As a Private Limited Company, the business profits are subject to income tax and is more favourable than the higher tax rate paid by an individual if he is conducting the business as a sole trader. The company can also pays dividends to the shareholders. A private company may not offer shares or debentures to the public but it can increase its capital by allotting new shares to existing or prospective shareholders in return for payment.

It is not only small businesses that register Private Limited Companies but also big businesses as company registration is the only way to protect a company name against registration by another person or business. It is also cheap and simple and will help you beat the competition to new prestigious company names.

The company can remain dormant and need not commence trading until it is ready. It will still need to file its Companies Registry Annual Returns and Declaration of AGM. If a Private Limited Company gets to the stage where it needs significant investment to grow then it has the option to convert into a Public Limited Company which will enable it to offer shares to the public and potentially to have its shares traded on a Stock Exchange like the Zimbabwe Stock Exchange.

What are the advantages?

• Limited liability – Shareholders are not personally liable for any debts or losses incurred by the company beyond the capital invested. This protects the shareholders personal assets.

• Separate legal entity – The company is treated as a separate legal entity from its owners, allowing for easier transfer of ownership.

• Perpetual existence – The company continues operating even if owners/directors change, providing continuity.

• Potential for growth – Raising capital is easier through issuance of new shares to finance expansion.

• Tax efficiency – Profits are taxed at income tax rates which may be lower than personal tax rates (PAYE) for owners.

• Professional image – Having “Ltd” in the company name provides an impression of a larger, more established business.

• Attracting investors – Structure allows for investment from business angels and venture capitalists.

• Employee incentives – Shares can be offered as part of remuneration packages to attract and retain talent.

• Reduced personal responsibility – Financial reporting requirements and other regulations are handled at the company level

• Credibility with clients/suppliers – Dealing with a registered company provides reassurance.

• Asset protection – Company-owned assets remain protected even if the business faces liabilities.

Requirements for registering a Private Limited Company

• Company names
• Directors information – name(s), I.D/Passport Number, address.
• Shareholders information – name(s), address.
• Company addresses – physical, postal and email.
• Company core activities e.g. mining, agriculture, transport, etc.