Welcome to our comprehensive guide on establishing a limited company in the UK; we’re here to illuminate each step with clarity and precision.
In today’s fast-paced business landscape, forming a limited company can offer unparalleled advantages in terms of liability protection, tax efficiency, and credibility.
However, navigating the incorporation process can seem daunting without proper guidance. So, stay with us as we highlight the intricacies of company formation, empowering you to lay a robust foundation for your business aspirations in the UK market.
What is a Limited Company?
A limited company is a type of business structure where the liability of its members or shareholders is limited to the amount of money they invest in the company. Additionally, the limited company structure is a separate legal entity from its owners, allowing you to enter into contracts, own assets, and conduct business in your own name.
Why Choose a Limited Company?
The main advantage of a limited company lies with limited liability. Essentially, it separates you from your business, meaning that as a company director, your liability is limited to the value of your shares in the business. Therefore, if the company is at risk of bankruptcy or legal action, your personal assets would be protected. This is one of the reasons why operating as a limited company may be more favourable, particularly if your business brings a level of risk that may not be covered by your insurance.
The 6 steps for setting up a Limited Company
If you have choosing to operate as a limited company is right for your business, we have broken down the steps to start your journey below!
1. Choosing your company name
Make sure the name you have chosen is available and complies with company names rules.
2. Choose director/s
You must appoint at least one director, which may include yourself, but you may also choose to have multiple directors. Directors work together to make decisions for the company, adhere to regulations, and bear the responsibility for tasks such as filling accounts and ensuring corporation tax compliance.
3. Decide on who the shareholders/guarantors are
A limited company must have at least one shareholder (where limited by shares) or one guarantor (where limited by guarantee). A director can hold shares which can be divided among other directors, should you choose to have multiple. Additionally, a shareholder that holds more than 25% of the shares constitutes as a ‘person of significant control (PSC) which we advise to identify in this step of the process.
4. Prepare company documents
Your company must obtain and complete certain documents that show the formation of the company and how it is to be run. These include:
- The memorandum of association
- The articles of association
Click here for more information in obtaining and completing these documents.
5. Check what records you will need to keep
You will need a full list of company and accounting records that you must keep. This includes records about the company itself such as directors, shareholders, and company secretaries along with internal votes and resolutions from shareholders.
6. Register with Companies House
Lastly, you must register your company’s official address and choose an SIC code which confirms what your company does. Additionally, you should register for corporation tax while completing this step.
And there you have it! A full breakdown of what a limited company is and how to set it up. Choosing a trading option should not be a quick decision, however, and we encourage all businesses to consider each trading option in full and decide on what is most beneficial for your business. Our trading options article provides an overview of each option for you to consider.
What happens next? Check out our guide: Running a Limited Company, for an insight to the stages following incorporation.
For further guidance, please get in contact with our Client Commercial Director, Fabrice Legris at fabricelegris@fiandertovell.co.uk.