Starting up a business and going after your dreams is an incredibly exciting and daunting time. One of the one most important decisions you will have to make early on is what type of company you want to set up.
Setting up as a limited company is always a popular choice and brings many benefits with it.
It may involve more paperwork and accounting than a sole trader business or partnership, but this is offset with extra protections in terms of financial liabilities.
A limited company’s liability is just that: limited.
Your company will be its own legal entity with its finances completely separate from the personal finances of its owners.
It’s probably why there are more than 4 million incorporated companies in the UK. roughly 93% of them are active.
So, if you’re set on starting up a limited company, here’s everything you need to know, step-by-step.
1. What type of limited company are you setting up?
Once you’ve decided to set up a limited company, you have two options to choose from. These are:
- Private Limited Companies (LTDs)
- Public Limited Companies (PLCs)
For reference most start-ups and small businesses will set up as a private limited company. Choosing to set up as a private limited company is a great option and has many benefits.
These include protection through limited liability and corporation tax and National Insurance efficiency gains. If it ever comes to it, it’s also easier to sell/transfer business ownership.
However, as a PLC you must have a minimum share capital of £50,000. With at least two shareholders, two directors and a qualified company secretary. So, there’s a bit more to it.
It might be worth doing a bit more research on these two options so you make the best-informed decision you can.
2. Picking your name
You may have been thinking about this for the past months or even years. Changing your mind constantly, always thinking of new options. This part is the most fun and frustrating. You want to get this bit right.
There are a few rules you will need to check when it comes to choosing a name. For example, your name cannot be the same as another registered company.
If your name is too similar to another company’s name or trademark you may have to change it if someone makes a complaint. So, it’s best to avoid that from the start and choose a unique name you’re happy with.
There are thousands of companies set up every day so you want to make sure the potential names on your list are still available. You can use this free name checker tool from Companies House to do just that. You should also remember to check the domain is available for your website.
3. Registering your company
Choosing your name will be one of the most fun parts but this is where things get a bit bureaucratic. Or at least it could go that way.
Again, you have some options to choose from when registering your company. You can do it yourself, use a formation agent, or your accountant could do it for you.
Most opt to use a formation agent, as it’s usually easier, quicker and with less chance of a mistake being made. So, it’s definitely worth the little extra cost.
Register a limited company yourself
- You can register your company with Companies House. It normally takes 24 hours to do so and will set you back £12 to submit your registration online.
- At this point you’ll need to be 100% set on your name as there’s no going back after this point. You’ll also need a UK address as its registered office. Keep in mind this address will be made public and is used by Companies House and HMRC to send official notices to the company. It will also need to appear on all company documentation. (Invoices etc.)
- You can download templates for these documents from the Companies House starting a company section.
Quick note: For your registered address you don’t need to use your home address if you don’t have an office. You can use a registered office address service that costs around £50 per year. These will sort out and send all mail to your home address after it gets sent to them.
Using a company formation agent
You’ll find there are plenty of company formation agents you can use, or you can use a solicitor to register.
- Using an agent could cost more but they are often quicker.
- These specialists will be able to guide you through the information needed for registering the limited company.
- Find a good agent using the Companies House Company Formation Agents directory.
- As always you can turn to Google to find some options as well. Just remember to read reviews and compare.
- The company formation agent will handle all the paperwork and submit the documents to Companies House. This could take them as little as 3 hours to do.
- The agent you choose may be able to offer other services as well. This could include the use of a registered office and more so be sure to check.
4. Completing the incorporation process
The final part is pretty much just ensuring all the required paperwork is done correctly.
There are certain documents that must be completed and returned to Companies House to finish the incorporation process.
Often, your company formation agent or accountant will complete these on your behalf:
- Memorandum of Association – limited company name, location, business type
- Articles of Association – outlines directors’ powers, shareholder rights etc. (this is often provided by the formations company that sets up the limited company).
- Form IN01 – This is a document listing the details of the company directors, company secretary if applicable, shareholders and details of the shares issued and the share capital. Download IN01 from Companies House.
What should I do after registering a limited company?
Once you’ve completed those steps you will get a Certificate of Incorporation. This is just to confirm the company’s existence, showing the company number and date of formation.
Another thing to consider will be tax. Most register for Corporation Tax at the same time as registering with Companies House.
However, for whatever reason you cannot, you will need to do this separately with HM Revenue and Customs (HMRC). You should aim to do this within three months of starting trading or risk a penalty.
There’s also some simple admin you will need to address such as setting up a business bank account. You may also need small business insurance to cover any work you’re doing.
But that’s it! You should now be able to start your business journey!