Aside from the sole trader route, the limited liability company is the most popular business structure in the UK.
If you want to set up a limited company online right away, simply click here.
The liability of company directors is ‘limited’ in that the company’s finances are separate from personal finances, which is not the case for sole traders.
Limited company shareholders are not responsible for any debts run up by the business, although directors may need to guarantee loans or credit taken out in the company’s name.
Requirements of limited companies
There are some high level requirements which all limited companies must fulfil:
The company must be registered at Companies House
The company’s annual accounts must be filed at Companies House
Annual Return (Form AR01) must be completed each year to ensure Companies House records the most up-to-date information about the company. This is subject to a modest annual fee.
HMRC must be informed if the company has any profits or taxable income on an annual basis.
Every limited company must complete an annual corporation tax return. Any liabilities must be paid within 9 months of the company year end.
All company employees must pay income tax and NICs on any income they receive.
The company formation process
Companies House is the regulatory body for the registration of all limited companies, and maintains the registry of companies.
Before you can start a business as a limited company, the company itself has to be registered with Companies House.
Registration itself is a simple process. You can either do this yourself, register via a company formations agent, or via your accountant.
The following documents have to be completed and returned to Companies House:
1) Memorandum of Association – this includes the names and addresses of the subscribers who are forming the limited company.
2) Articles of Association – outlines the directors’ powers, and any shareholders’ rights, etc.
3) Form IN01 – contains details of the director(s), company secretary (if required), details of any shareholders, and details of the share capital (if it is a company limited by shares).
Form IN01 replaced the old Forms 10 and 12, following Companies Act changes from 1st October 2009.
Many business owners use formation agents to prepare these documents.
The Companies House website provides detailed guidance and FAQ’s which describe all aspects and requirements of the registration process, including the limitations imposed on company names, and the payment required to complete the registration process.
Types of Limited Company
Private Limited Companies, the most typical set up for small UK businesses cannot offer shares to the public, but may have any number of shareholders.
Each limited company must have at least one director. Following the implementation of the Companies Act 2006, having a company secretary is no longer a legal requirement, although you may wish to appoint one.
Unlike limited liability companies, public limited companies (PLCs) are allowed to offer their shares to the public in order to raise funds. A PLC must have at least 2 directors to make management decisions, and a company secretary.
Online Company Formation
Thousands of Bytestart visitors have set up companies online via our partnership with Duport over the past 5 years – the service is fast and simple, and help is on hand if you require it. You can find out more here.