Starting a limited company is an exciting journey that involves taking the necessary steps to ensure your business’s legal obligations are met.
To help make the process less daunting, this step-by-step guide will take you through the key steps and requirements needed to start a limited company.
What is a limited company?
A limited company is a business structure in which the company is treated as a separate legal entity.
The advantages of starting a limited company
- The company and its owners will be treated as separate entities in the eyes of the law.
- The business finances and the owner’s finances will be kept separate.
- Profits for corporations are taxed at a reduced rate.
The process of setting up a limited company
To set up a limited company, follow the steps below:
Evaluate
Before starting a limited company, it is important to consider whether this business structure suits your particular needs.
For example:
If you are looking for personal liability protection, a limited company will provide this. However, it is more complex and costly to manage than other business structures, and you will be required to pay corporation tax
We recommend you consult an accountant on which business structure is the best for you.
Select a Name
You will be required to choose a name for your business; the name should be unique and cannot be :
- Offensive
- Similar to another company’s name
Choose Company directors
At least, one director is required to run your company. The companies’ board of directors is accountable for setting strategic direction, enforcing corporate regulations, and guaranteeing that all required paperwork is submitted and taxes are paid.
Unsure what to file? Read our comprehensive blog: Limited Company Director’s Guide: What to File & When
Decide on company shareholders
At least one shareholder, who may also serve as a director, is required for a limited company to run.
- At shareholder’s meetings, stockholders cast votes to make decisions with each stock share equalling one vote.
- Someone who owns more than 25% of the company’s stock, has more than 25% of the voting rights and has the right to appoint or remove the majority of the board of directors is considered a “person with significant control” (PSC).
What is a” person of considerable control” (PSC)?
PSCs, or “Persons with Significant Control,” are persons or groups that have significant voting power over the management or policies of a limited company.
Incorporate your limited company
All limited companies in the United Kingdom must be registered with Companies House.
The following forms must be filled out for filing to the Companies House:
| Memorandum of Association | Form 10 | Form 12 | Articles of Association |
|---|---|---|---|
| Company Name, Location, and Activity | The director’s name, address, and registered company address | Declares that the limited company meets the requirements set out by the Companies Act | Defines the roles of directors and shareholders. |
Keep records
You will be required to retain records of the business.
Unsure of what records to keep? Read our blog here.
Registering a limited company
You can now register a limited company with Companies House.
You will need the following on hand:
- Official address of your company (not a post box address)
- SIC Code signifying the nature of business
- Each director’s details like home address (often known as a “service address”), date of birth (DOB), Occupation and nationality
- Shareholder/person with significant control details like full name, DOB, address and nationality
- Statement of capital
Unsure of your SIC code? Find a list here.
Directors are not required to live in the UK but companies must have a UK registered office address.
Cost of registering a company
Company registration fee charged by companies House is £12.
What’s next?
Form IN01 allows you to register your limited company online or by mail with Companies House.
After registering your limited company, the following will happen:
- You will obtain a “certificate of incorporation” certifying the company’s legal existence. (This document contains the company number and founding date.)
- You will receive 6 digit alphanumeric code called authentication code from the Companies House. This will enable you to do the online filings to the Companies House.
- A ten-digit Unique Taxpayer Reference (UTR) will be sent to your company address by the HMRC.
Things to note
You must register by mail if you don’t use “limited” in your business name.
How long does registration take?
- If you apply online, your business will be registered in 24 hours.
- It takes ten days to register via mail.
Conclusion
A limited company is a type of business structure that offers several advantages for entrepreneurs.
It limits the liability of its owners, provides more financial and legal protection, and can be beneficial in terms of tax savings. Setting up a limited company requires registering with Companies House, appointing directors, and other related tasks.
Overall, the process of setting up a limited company is relatively straightforward. And can bring benefits to entrepreneurs. Therefore, if you are considering starting a business, it might be worth establishing it as a limited company.
Fusion Accountants are a team of specialists that offer advice and services to limited companies. If you are considering to start a limited company and need guidance, get in touch today to put you on the fast track of owning a limited company.
