Starting a limited company in the UK can be a rewarding endeavor, offering benefits such as limited liability, potential tax advantages, and a professional image. This guide provides a comprehensive overview of the steps involved in setting up a limited company in the UK, from initial planning to registration and compliance.
Step 1: Understand What a Limited Company Is
A limited company is a type of business structure that offers limited liability to its shareholders. This means that the personal assets of shareholders are protected if the company incurs debts or legal claims. There are two main types of limited companies:
- Private Limited Company (Ltd): Most common type, suitable for small to medium-sized businesses.
- Public Limited Company (PLC): Can sell shares to the public and is usually larger and more complex.
Step 2: Choose a Company Name
Choosing the right name for your company is crucial. It should be unique and not too similar to any existing company name. Here are some guidelines:
- The name must end with “Limited” or “Ltd”.
- It should not contain offensive or sensitive words unless you have permission.
- Check the availability of your chosen name using the Companies House name availability tool.
Step 3: Register an Address
Every limited company in the UK must have a registered office address. This is the official address where legal documents and correspondence from Companies House will be sent. The address must be a physical location in the UK and can be your home address or a commercial property.
Step 4: Appoint Directors and a Company Secretary
A private limited company must have at least one director. Directors are responsible for running the company and ensuring it meets its statutory obligations. You can also appoint a company secretary, but this is not mandatory for private limited companies.
Step 5: Allocate Shares and Identify Shareholders
You’ll need to allocate shares to the initial shareholders (also known as subscribers). When forming the company, you must decide:
- How many shares to issue.
- The nominal value of each share (usually £1 per share).
- The distribution of shares among the shareholders.
Step 6: Prepare the Memorandum and Articles of Association
The Memorandum of Association is a legal statement signed by all initial shareholders agreeing to form the company. The Articles of Association set out the rules for running the company, agreed upon by the shareholders and directors. Standard templates are available, or you can draft bespoke documents to suit your company’s needs.
Step 7: Select SIC Codes
SIC (Standard Industrial Classification) codes are used to classify your company’s business activities. When registering your company, you must select at least one SIC code that accurately describes your business. SIC codes are essential for statistical purposes and help categorize the nature of your business for Companies House and other governmental bodies.
How to Find the Right SIC Code:
- Search Online: Use the Companies House SIC code list available on their website to search for codes relevant to your business.
- Multiple Codes: You can select up to four SIC codes if your business operates in different areas.
- Accuracy: Ensure that the SIC code(s) you choose accurately reflect your main business activities.
Why Are SIC Codes Important?
- Identification: Helps in identifying your company’s main activities.
- Compliance: Required for the incorporation process.
- Reporting: Used for official reports and statistics.
How to Choose the Correct SIC Code:
- Identify Main Business Activities: Clearly define the primary activities of your business.
- Search the SIC Code List: Use the Companies House SIC code list to find codes that match your business activities.
- Select Appropriate Codes: You can choose up to four SIC codes if your business has multiple activities.
- Ensure Accuracy: Make sure the chosen codes accurately reflect what your business does.
Example SIC Codes:
- Retail:
- 47110 – Retail sale in non-specialised stores with food, beverages or tobacco predominating.
- 47410 – Retail sale of computers, peripheral units and software in specialised stores.
- Manufacturing:
- 14190 – Manufacture of other wearing apparel and accessories.
- 28990 – Manufacture of other special-purpose machinery n.e.c.
Step 8: Register with Companies House
To officially form your company, you need to register it with Companies House. This can be done online or by post. You’ll need to provide the following information:
- Company name
- Registered office address
- Details of directors and company secretary (if applicable)
- Details of shareholders and their shares
- Memorandum and Articles of Association
- Selected SIC code(s)
The registration fee is £12 for online applications and £40 for postal applications. Once registered, you’ll receive a Certificate of Incorporation confirming your company’s legal existence.
Register your company online here.
Step 9: Register for Corporation Tax
Within three months of starting your business, you must register for Corporation Tax with HM Revenue and Customs (HMRC). You’ll need your company’s Unique Taxpayer Reference (UTR), which is sent to your registered office address shortly after incorporation. You can register for Corporation Tax here.
Step 10: Set Up a Business Bank Account
It’s important to keep your business finances separate from your personal finances. Most banks offer business accounts specifically for limited companies. You can find and compare the best business bank accounts for 2024 here.
Step 11: Comply with Ongoing Legal Requirements
Running a limited company involves ongoing compliance with various legal requirements, including:
- Annual Confirmation Statement: Confirming the information held by Companies House is accurate.
- Annual Accounts: Filing financial accounts with Companies House. More information is available here.
- Corporation Tax Return: Filing a tax return with HMRC and paying any due taxes. More information is available here.
- VAT Registration: If your turnover exceeds the VAT threshold (£85,000 as of 2024), you must register for VAT.
- Payroll and PAYE: If you employ staff, you need to set up a payroll system and operate PAYE (Pay As You Earn).
Managing Your Company’s Finances with the Right Accounting Service
Managing the finances of a new company can initially seem overwhelming, but there are excellent accounting services that can help streamline the process. Two of the best options are FreeAgent and The Accountancy Partnership.
- FreeAgent: (Lifetime 10% Off)A comprehensive accounting software designed for small businesses, FreeAgent takes care of self-assessment, final accounts, and corporation tax, making it easy to manage your business finances with minimal effort.
- The Accountancy Partnership (Exclusive Offer Up to 40% off for a Limited Time): Offers a range of accounting services tailored to small businesses, including bookkeeping, payroll, and tax services. Their support can help you keep on top of your financial obligations without the stress.
Need Help Starting Your Limited Company? Explore The Top Company Formation Services
If you need assistance with setting up your company, there are several companies that offer comprehensive services to help you form a limited company and provide a registered office address:
- 1st Formations: Provides a range of formation packages, including registered office address and company secretarial services. They offer fast and efficient service with a focus on customer support.
- Quality Company Formations: Offers a variety of formation packages tailored to meet different business needs. Their services include registered office address, business mail forwarding, and more, ensuring you have everything you need to start your business.
- Rapid Formations: Known for their quick and reliable company formation services, Rapid Formations provides additional services such as address services, mail forwarding, and legal document templates.
- ANNA Money: Provides an all-in-one service that includes company registration and a business account, simplifying the process of starting and managing your business finances.
- Tide: Offers company registration services along with a business bank account, making it easy to manage your finances from the start.
Conclusion
Setting up a limited company in the UK involves several steps, from choosing a company name and registering with Companies House to complying with ongoing legal requirements. By following this guide, you can ensure that you cover all the necessary steps to start your business on a solid legal footing. Always consider seeking professional advice to tailor these steps to your specific circumstances and ensure full compliance with UK law.
