Setting up a Limited Company
If you’re thinking of setting up a limited company, there are a few things you need to know. First, you’ll need to register your company with Companies House. This is a simple process that you can do online. Once your company is registered, you’ll need to set up a bank account and get some basic accounting software in place. You’ll also need to appoint a company director and secretary.
Once you’ve got all of that sorted, you’ll need to start thinking about marketing and promotion. You’ll need to create a website and some social media accounts, and start getting the word out about your business. You might also want to consider exhibiting at trade shows or attending networking
Setting up a Limited Company can be a great way to protect your personal assets and give your business a professional image. Limited Companies are companies that are legally separate from their owners. This means that if your business owes money, your personal assets are protected. Limited Companies also have to follow certain rules and regulations, which can give your business a more professional image.
What You'll Need
You will need 3 pieces of information for yourself, any shareholders, directors, or guarantors that will be members of your limited company.
You can choose from the following information:
- town of birth
- mother’s maiden name
- father’s first name
- telephone number
- national insurance
- passport number
How To Register
You can register your limited company by using the HMRC online service available at gov.uk.
Alternatively, you can register by post by downloading and sending the IN01 form.
If you have an accountant or someone that manages your finances, they can also register your company for you. They may do this using the online service or by using third-party software.
If you wish to register your limited company without using the word ‘limited’ in its name, you must register by post.
If you are using the online service to register your limited company, you will be charged a £12 fee that is payable by debit or credit card.
With this route, your company will usually be registered within 24 hours of application.
To register by post, you will need to pay a fee of £40 and send this via cheque made out to ‘Companies House’ along with your IN01 form.
Postal applications typically take around 8 to days.
Choose a Company Name
The first thing you will need to do when registering your limited company is to choose a name that’s right for you.
Your company name cannot be the same as another registered company or be too similar.
If your name is in fact too similar to another business, you may have to change it if a complaint arises.
Your company name must also end in either ‘Ltd’ or ‘Limited’, or the welsh equivalent if you are registering your company in Wales.
You cannot use the same company name as another business where the only difference is special characters or punctuation.
For example, ‘First Class Accounting’ and ‘First-Class Accounting’.
You are also prohibited from using any offensive language within your name or that of a sensitive nature.
Finally, you cannot use words or make suggestions of a connection to government bodies or local authorities, unless you get permission.
You can trade under a different name to the one you are registered with. This is known as a ‘trading name’ or ‘businesss name’.
Business names have similar rules to that of a company’s registered name, however, a trading name cannot include the words ‘limited’ other other variations of it.
To ensure you register your company with a name that hasn’t been used by another company, you can use the Companies House register to enter your ideal name.
If this name is in fact too similar to another, Companies House will inform you of so and not let you proceed with registration.
Part of setting up a limited company is appointing directors. This is a critical step, as the directors will be responsible for the overall management of the company.
While the shareholders may have a say in the direction of the company, it is the directors who will be responsible for its day-to-day operations.
Appointing directors is not a decision to be taken lightly, as they will have a significant impact on the company. It is important to appoint directors who are experienced and knowledgeable in the business world, and who will be able to provide the company with the guidance it needs to succeed.
The directors should also be individuals who are committed to the success of the company, and who are willing to work hard to ensure the company follows its goals.
To be eligible for a director’s position there are certain criteria that you need to meet.
Every limited company is required to have at least one director registered and must be over the age of 16 and not previously disqualified.
A director does not need to live in the UK, however, they are required to have a registered office address in the country.
They will also need to provide a service address that will be publicly available on Companies House. If they choose to use their home address as their service address, the director can ask Companies House to remove it from the register.
A company secretary is not a requirement for a limited company, however, most operators tend to use a company secretary to take on some of the director’s responsibilities.
The secretary can also be a director of the company, though, cannot be the company’s auditor.
Make note, even if the secretary bares some directors responsibilities, it is ultimately still the director that is legally responsibly for the company’s obligations.
Limited companies that are limited by shares have shareholders who own the business.
Most limited by shares companies have ‘ordinary’ shares. This means that shareholders get one vote per share when it comes to making decisions for the company.
If your company is limited by shares, you must have at least one shareholder, this shareholder can also be the director of the company.
A shareholder can also receive dividend payments throughout the year.
If you are the sole shareholder of a business, that means you own 100% of the company.
An individual share can be of any value. Typically, most limited companies are registered with shares at £1, unless the directors or shareholders are making investments in the company.
A statement of capital is a document of information that you will need to provide when registering your limited company.
This document will detail the value of each share, and how many shares the company is issuing.
For example, if you had 100 shares at £1 each, the total share capital is £100.
When submitting these details, you will also need to provide relevant information for each shareholder of the company.
This includes their names and addresses.
If a limited company is closed down; forced by liquidation from debts that the company cannot pay, shareholders will need to pay their shares in full to the company.
If you are choosing a low value per share when registering, you are limiting the risk of exposure if your company was to get in trouble.
Appointing Persons With Significant Control (PSC)
A PSC; or Persons With Significant Control, is someone who controls your company. A PSC can also be referred to as a ‘beneficial owner’
When registering your limited company, you must inform Companies House who your PSC’s are.
It can be someone associated with your company, yourself, or a director.
A PSC is typically someone who holds:
more than 25% of shares in the company
more than 25% of voting rights in the company
the right to appoint or remove the majority of the board of directors
To appoint a PSC you will need to provide certain information about them, including their level of shares and voting rights. The details you need to are as follows:
- date of birth
- nationality and country of residence
- correspondence address – known as the ‘service address’
- home address (this must not be disclosed)
- the date they became a PSC of the company
- the date you entered them into your PSC register
- all natures of control which apply
- over 25% up to (and including) 50%
- more than 50% and less than 75%
- 75% or more
Articles of Association
When you register your company you will need to provide additional documents outlining the agreed-upon terms.
An article of association is a document that details written rules about the running of the company and must be agreed by the shareholder, guarantors, directors, and company secretary.
To produce your article of association you can either write your own and send it with your application or use ‘model articles’ (https://www.gov.uk/guidance/model-articles-of-association-for-limited-companies) as a template.
Memorandum of Association
A memorandum of association is another document that you must provide when setting up your limited company.
This is a legal statement signed by all shareholders and guarantors agreeing to form the company.
If you are registering by post you can use the ‘model articles’ (Memorandum of association) as a template.
If you are registering online, you do not need to write your own memorandum of association as one will be created for you as part of the process.
Running a company means you are responsible for keeping certain records over time. Whether this is the documentation for the company, or records relating to its trading, most documents must be kept for 6 years.
When setting up your limited company it is important that you keep any documents related to registration and the company itself. This typically includes documents such as any loans or mortgages secured, shareholder agreements, and directors’ information. You can see a complete list of all the company records you need to keep below:
- Shareholder votes and resolutions
- Company debentures (promises to repay loans in the future)
- Share transactions
- Loans or mortgages secured against company assets
- Information on directors, shareholders, and secretaries
- Indemnities (promises for payments payable if something goes wrong and the company is liable)
You will also need to hold on to your financial and accounting records, such as invoices and receipts. This must be kept for a minimum of 6 years, sometimes longer if they show a transaction that covers more than one accounting period.
You can see a complete list of the accounting records you must keep here:
- Details of company assets
- Debts owed
- Debts owing
- Stock the company owns and the end of the financial year
- Income and expenses of the company (receipts/invoices)
- Bank statements
- Details relating to grants
- Supplier details
- Customer details
- Other company correspondence
Business Bank Account
The final step in setting up a limited company is opening a bank account. This account will be used to manage the company’s finances and will be the primary way to accept and make payments. It is important to choose a bank that is reputable and has experience working with limited companies. Once the account is open, the company will need to provide the bank with certain documents, such as the articles of incorporation and the company’s registered address. The bank will also need to be provided with a list of the company’s directors.