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A Comprehensive Guide on How to Setup a Limited Company in UK

Aside from the sole trader option, the most popular business structure in the UK is forming a limited liability company. Setting up your own limited company is actually one of the smartest ways for you to get paid to work. Having your own limited company gives you the power to own everything, define your brand, run your business efficiently and be able to try things you couldn’t do as a sole trader. When you decide to set up a limited company, you will discover that there are several options available.

Different Types of Limited Companies

Setup a Limited Company in UK - Point 1There are primarily two types of limited companies you can form:

  • Private limited company (LTDs)
  • Public limited company (PLCs)
Most startups, contractors, freelancers and small business owners are better off setting up a private limited company because they don’t have as many requirements as a public one. If you want to set up a PLC, you need to have about £50,000, two directors and shareholders and a qualified company secretary.

Before Registration

Setup a Limited Company in UK - Point 2In order to set up a private limited company, you have to get registered with Companies House. This process is defined as incorporation and has some basic requirements, which are:

  • A name for your company (Check out rules for what can and cannot be included in it)
  • At least one director and shareholder
  • A company address
  • The agreement of all ‘subscribers’ or initial shareholders for forming the company, which is called memorandum of association.
  • A statement of capital, which is details of the shares of the company and the rights attached to them.
  • Articles of association that are written rules about how the company will be run.
A Certificate of Incorporation will be provided once you are registered. This is confirmation of the existence of the company and comprises of its date of formation and company number.

How to Register

Setup a Limited Company in UK - Point 3There are several methods you can use for registering your company, which are listed below:

  • Online registration is possible as long as your company is limited by shares and uses model articles, which are the standard articles of association.
  • The form IN01 can also be used for registering via post.
  • With an agent
  • Through third party software
However, bear in mind that different rules apply to you if your company is based outside the UK. You can contact UK Trade and Investment (UKTI) for additional details.

Fees

Setup a Limited Company in UK - Point 4It usually takes about 24 hours for online applications to be registered and you have to pay about £15 via PayPal or a debit or credit card. As far as postal applications are concerned, they are processed within 8 to 10 days and you have to pay £40 via cheque made out to the Companies House. If you are willing to pay £100, you can benefit from the same-day service.

Company Address

Setup a Limited Company in UK - Point 5You need to have a registered office address as that’s where all the official communications will be sent like letters from the HM Revenue and Customs (HMRC) and Companies House. You should ensure that the address is:

  • A physical address
  • Exists in the same country where you are registering your company
A PO Box can be used, but after the PO Box number, you need to write a physical address and postcode. It is possible for you to give your own home address or that of the individual who will manage Corporation Tax.

Directors

Setup a Limited Company in UK - Point 6A company cannot be formed if it doesn’t have at least one director. Directors hold the legal responsibility of running the company and ensuring that the company reports and accounts are done properly. A director has to be older than 16 and should not be disqualified from becoming one. You can also opt for another company as a director, but at least one director has to be a person. The names and addresses of the directors are publicly available at Companies House.

Secretaries

Setup a Limited Company in UK - Point 7A private limited company doesn’t need to have a company secretary. Nonetheless, they are taken on by some companies for shouldering some of the responsibilities of a director. The company’s secretary can serve as a director, but they cannot be an auditor or an ‘undischarged bankrupt’ unless permission is granted by the court. You can get the help of a service, such as 1st company formations, as it often becomes very difficult for new registrants to understand all these requirements. A professional company can be helpful.

Shares and Shareholders

Setup a Limited Company in UK - Point 8There should be at least one shareholder of a company that’s limited by shares. This can also be a director and there is no limit on the number of shareholders. A shareholder is basically an owner of the company so they hold some rights like their vote is required by directors for making changes to the company. The statement of capital submitted at the time of registration has details about the class of shares issued as the rights vary with different types. Some differences of these classes are based on:

  • The type of dividend given
  • Whether voting on company matters can be done
  • Whether shares can be exchanged or ‘redeemed’ for money
  • How many votes are given

Memorandum and Articles of Association

Setup a Limited Company in UK - Point 9When a company is registered, it needs to have a “memorandum of association” and an “articles of association”. The former is a legal statement initialed by all shareholders made for forming the company. It has set wordings that cannot be changed and a template can be found online. Articles of association, on the other hand, are rules for running the company that is decided by shareholders and directors. Standard articles called ‘model articles’ are used by most limited companies, but own articles can also be written if you are not registering your company online in the UK.

Corporation Tax

Setup a Limited Company in UK - Point 10When you have completed your company’s registration with the Companies House, you need to register it for Corporation Tax. This should be done within three months of beginning your business, which includes buying, selling, advertising, hiring someone or even renting a place. Late registration usually comes with a penalty. The HMRC will send your Unique Taxpayer Reference (UTR) to your company address that can be used for Corporation Tax registration online in the UK.

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Article Published by Souvik Banerjee

Web Developer & SEO Specialist with 10+ years of experience in Open Source Web Development, specialized in Joomla & WordPress development. He is also the moderator of this blog "RS Web Solutions".

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