Aside from the sole trader route, the limited liability company is the most popular business structure to trade under in the UK.
With a limited company, the liability of company directors is ‘limited’ in that the company’s finances are separate from the personal finances of the business owner. This is not the case for those who run their business as a sole trader (self employed).
Limited company shareholders are not responsible for any debts run up by the business, although banks may ask company directors to provide loan guarantees for commercial loans or credit taken out in the company’s name.
Registering a new company – the formation process
Companies House is the regulatory body for the registration of all limited companies in the UK, and maintains the registry of companies.
If you want to set up a limited company right away, you can do this easily online with ByteStart’s Company Formation Partner.
Before you can start a business as a limited company, the company itself has to be registered with Companies House.
Registering a new company is a relatively simple process, but there are several ways to undertake the actual formation.
- You can set up a company directly via Companies House. This costs £12.
- Use a formations agent. They will set up your company, and provide any help you need during the set up process. They will often be able to add a variety of ‘extras’, such as registered address services, and even help set up a bank account if needed.
- Use an accountant. Most limited companies hire an accountant to look after their tax affairs. It could make sense to hire an accountant to set up your company, as well as look after your books going forward. An accountant will also be able to set your company up for Corporation Tax, VAT, as well as your needs as an employer.
The end result is the same in terms of forming your new company. If you could use some help – particularly if you haven’t set up a company before – using a formations agent might be a smart choice.
8 things to consider in advance of forming your company
Although forming a company is a straightforward and fast process these days, there are some important steps you need to take before starting the application process.
Is going limited the right choice for you?
Have you considered the differences between setting up as a sole trader vs. forming a company?
If you are reading this article, chances are you have already decided to incorporate, but it’s best to double-check, as there are some significant differences between the two structures.
What type of limited company do you want to form?
Most private companies are limited by shares, in that they have share capital and shareholders. This is the type of company chosen by the vast majority of Bytestart visitors.
There are several other types too:
- Private company limited by guarantee – with members rather than shareholders. Often used by non-profits and charities.
- Public limited company – larger enterprises which can offer shares to the public. Subject to stricter rules than smaller companies.
- Limited liability partnership – shares features of both a standard partnership, but with the added protection of limited liability.
- Private unlimited company – used when financial privacy is a priority, but shareholders have no protection. Unusual structure.
Choosing a name for your new company
You can choose any name you like, as long as it is not similar to an existing name, offensive, or uses ‘sensitive’ words which are excluded by Companies House.
A professional name which represents your brand is always a good bet. Read our guide to company naming rules.
Choosing an address for the company, and its officers
All companies must have a registered office address where official paperwork can be delivered.
This address appears on the public record.
Directors, secretaries and subscribers can choose to provide a service address for their individual entries, which means their residential addresses don’t need to appear on the public register.
Who are your company officers going to be?
All limited companies must have at least one director. You may also appoint a company secretary if you like, although this is not mandatory.
Make sure you read up on directors’ duties and responsibilities before making any appointments.
Who are the shareholders going to be?
All limited companies have at least one shareholder, or guarantor (if it’s a company limited by guarantee).
In the case of a company limited by shares, think carefully about how shareholdings are apportioned. Do you want to issue more than one type of share?
We recommend discussing this with an accountant, who can also advise you on the tax implications. Also, consider drafting a shareholders’ agreement.
Who are the People of Significant Control (PSC)?
Companies House needs to know about individuals or companies who exert a significant degree of control over a company.
For example, this would include a list of anyone who owns 25% or more of the share capital.
This information must be submitted during incorporation, and updated should the situation change at any stage. Read more about PSCs.
What SIC code(s) should your company have?
All companies are classified according to SIC codes, which stands for ‘Standard industrial classification of economic activities)’.
The codes are used to collect data and identify trends across industries over time. You can search the list of SIC codes here.
Documents you will need to complete to register a limited company
When you register a new limited company, the following documents need to be submitted to Companies House
- Memorandum of Association – this includes the names and addresses of the subscribers who are forming the limited company. If you are applying online, the Memorandum is automatically generated. If you are setting up a company via post, you will need to download and template and fill it in.
- Articles of Association – the Articles outline the directors’ powers, and any shareholders’ rights, etc. Most limited companies adopt the Companies House ‘model’ articles. If you require any specific clauses to be written into your Articles, a solicitor will typically draft the document. This can then be submitted during the formation process.
- Form IN01 – this contains details of the director(s), registered address, company name, company secretary details (an optional appointment), details of any shareholders, details of the share capital (if it is a company limited by shares), and details on any Person with Significant Control (PSC). You only need to send in a completed Form IN01 if you are applying by post. This information is automatically captured if you apply for a company online.
Most people form a company online, so assuming you don’t require tailored Articles, you can complete the entire formation process without the need to submit any supplementary paperwork.
However you decide to set up a company (direct, via a formations agent, or via an accountant), make sure you have the following details to hand to avoid delays during the set up process:
Have this information ready
For the company itself:
- Proposed company name
- The type of limited company – usually private limited by shares
- Company registered office address
- The situation of your registered office (England & Wales, Wales, Scotland, or N. Ireland).
- SIC Code(s)
- Statement of capital (currency, class of shares, number of shares, nominal value, total unpaid).
- The particulars of rights associated with each share class
- Names and addresses of all original subscribers, plus shareholdings.
- Details of all Persons of Significant Control, including the nature of the control.
For individuals (directors, secretaries, PSCs, subscribers)
- Full name
- Former name (if applicable)
- Service address (appears on the public register)
- Normal residential address (can be kept private if you provide a separate service address).
- Date of birth (only month and year appear on the public register)
- Business occupation
Requirements of Limited Companies
There are some high-level requirements that all limited companies must meet:
The company must be registered at Companies House
The company’s annual accounts must be filed at Companies House.
A Confirmation Statement must be submitted every year to ensure Companies House records the most up-to-date information about the company. You can do this online or with a paper form. It currently costs £13 to file your Confirmation Statement online, or £40 if you choose the paper route.
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 (CT600). Any liabilities must be paid within 9 months of the company year-end.
All company employees must pay income tax and National Insurance Contributions (NICs) on any income they receive.
Form a limited company – ready to trade in 3-6 hours!
Hundreds of ByteStart visitors have set up companies online through leading company formation agent 1st Formations.
The application process takes just 10 minutes to complete, and friendly help is on hand if you have any questions. Find out more here.
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