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How to Set Up a Limited Company in the UK

How to Set Up a Limited Company in the UK


Setting up and Registering your own limited company in the UK is very simple and cost-effective. Having your own limited company can save you from many tight spots and it’s the smartest way to get paid for work.

Company formation process is lasting till the period of one year. Under this phase of 12 months, companies get to know about all the things that are required for company operations.

It might be easy to get the online formation of your company but if you rush to do that, and that too without proper research then it can become a big trouble for you.

Generally, business owners work as sole traders, start-ups, Umbrella Company or limited liability companies. If you settle on company formation, then here’s something you need to know about.

Why setup limited company?

When registering and running a business bank account a limited company, there is indeed more paperwork and accounting involved compared to a sole trader business or partnership.

However, this additional effort is balanced by the extra protections it offers in terms of financial liabilities.

A limited company is considered a separate legal entity, allowing it to possess property and assets, accrue debts, initiate legal actions, and be subject to legal actions. Notably, the company’s finances remain distinct from the bank account and personal finances of its owners.

This statement suggests that in the event of a business failure, you and the other owners would generally not be personally liable for any of its debts, unless there has been fraud or you have personally guaranteed specific liabilities, such as rent payments to a landlord.

This means that your personal assets would typically be protected from being used to repay the business’s debts.

A limited company provides a favorable option for running a business with reduced risk to personal wealth or assets, unlike sole traders or business partnerships. Ownership in a limited company is divided into shares, which are distributed among shareholders.

These shares can be segregated into various classes, each with distinct rights, such as voting or non-voting privileges. Shareholders may hold these shares in any desired proportions, offering flexibility in ownership structures.

What is the difference between a private and public limited company?

Private limited companies and public limited companies are both owned by shareholders, but differ in formality. Private limited companies have less formal requirements and restrictions compared to public limited companies.

This includes fewer reporting obligations, less stringent governance rules, and a more relaxed approach to shareholder meetings and decision-making processes.

A public limited company is required to have a minimum share capital of £50,000, whereas a private limited company does not have a specific minimum share capital requirement.

In a private limited company, it is possible to have a single shareholder who can also serve as the director of digital company. While there is no limit on the number of shareholders, shares cannot be publicly traded on the stock market.

Legal requirements for limited companies

Limited companies must have at least one director to run the company limited business.

Filing an annual confirmation statement with Companies House is a necessary step to ensure accurate and up-to-date records. This statement captures any modifications in directors’ details service address, registered office, share capital, and shareholdings.

It serves as a snapshot of the business, either confirming the changes or asserting that no alterations have occurred.

Submit your company’s annual accounts to Companies House.

To fulfill their tax obligations, companies must submit an annual corporation tax return to HM Revenue and Customs (HMRC).

After the submission, the corporation tax is calculated, and the payment is expected to be made within nine months from the first register a company‘s accounting year end.

If your business turnover surpasses the VAT threshold of £85,000, it is mandatory for your company to be registered for VAT and submit quarterly VAT returns online.

However, if your turnover falls below the threshold, voluntary company registration is still an option. There are advantages and disadvantages to voluntary registration, so it is advisable to consult with experts if you are uncertain.

All employees, including directors, are required to pay income tax and Class 1 National Insurance Contributions. If you handle the company payroll internally, it is your responsibility to report employees’ payments and deductions to HMRC before each payday.

You are then expected to make monthly payments to HMRC to settle your obligations. However, small employers may have the option to pay quarterly instead.

What documents are needed to form a limited company?

If you decide to register as a limited company, you will need to submit registration documents to Companies House before commencing trading.

Whether you choose to do this personally or through a company formation agent, the documents must be filed for official registration.

This step is crucial for establishing your company legally and ensuring compliance with regulations. Once the company registration process is complete, you can begin trading as a limited company.

What should I do after registering a limited company?

After successfully registering as a limited company, you will receive a Certificate of Incorporation. This official document confirms the company’s establishment, displays its unique company number, and provides the company details and date of formation.

When starting a limited company, it is essential to register with HMRC within three months of commencing trading. Failure to do so may result in penalties. HMRC typically contacts the registered office service the company’s registered office to prompt registration.

4 Steps to Setting up a Limited Company in the UK

1. Selecting the type of limited company

Business owners have an option to select from either of the following types

  • Public Limited Companies(PLCs)
  • Private Limited Companies(LTDs)

To form a PLC there should be share capital of minimum £50,000, two directors, two shareholders and eligible company secretary. Generally, LTDs are formed by contractors, freelancers, small businesses and start-ups.

2. Form your Limited Company

Forming a limited company may be considered as a complex and technical process, but in reality, it is very effortless. You can form a company online in no time. You just have to provide precise details to Companies House about company’s directors and identification. You will have your own limited company formed in just a few hours.

3. Incorporation process

Incorporating to register your company with the Companies House is like the legal inception of your company in the UK. In order to complete the incorporation process of the company, you have to fill the following documents and submit them to Companies House.

  • Form 10 – consisting of directors’ name, address and registered office address of the company.
  • Form12- documents that explain that the limited company is formulated under terms and conditions of the Companies Act.
  • MOA-  Memorandum of Association is an essential document of the company which shows all the major information on the company, business works, directors, etc
  • AOA- Article of Association- it’s a document specially compiled for outsiders consisting of information about Director’s power, rights of stakeholders, rule, and regulation of the company, etc.

Compile all these documents before you step towards Companies House and once your company name, is registered, you will receive “Incorporation Certificate”. This certificate proves that your company legally exists in the UK.

4. After incorporation

Here your company is successfully incorporated but the year company incorporation is still not completed. There are still many legal things that should be taken care of.

Having limited company accountants or outsourcing accounting activities is a necessary part of the first year as this will help you to keep financial records of the new company, and you will have smooth annual returns at the end of your company’s first fiscal year.

You would be required to fill the forms send uk company by Inland Revenues and return them confirming all the company’s details. Keep your financial record up-to-date that the HMRC at the end of the year would become easy for your company.

Hence, at the end of the first year, your accountants have to complete the annual returns and other company documents required to submit it on time For HMRC and file a copy at Companies House.

Target Accounting UK
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