A Guide To Limited Company Registration

A limited company is one of the most popular business structures in the UK, offering business owners the advantage of limited liability. Whether you're starting a new venture or transitioning from a sole trader or partnership, setting up a limited company can provide a range of financial and legal benefits.

Moving from a sole trader to a limited company could offer significant advantages if your business is growing. Not only can it be more tax-efficient – since you'll pay corporation tax instead of income tax – but it also limits your personal liability for business debts, which can provide peace of mind as your venture expands.

In this guide, we'll walk you through registering a limited company step-by-step. From choosing the perfect company name to gathering the required documents and submitting your application to Companies House, this article will cover everything you need to know.

Why Set Up a Limited Company?

Setting up a limited company offers several benefits, especially for someone already operating as a sole trader looking to formalise and structure their operations. Here are the main advantages:

• Access to Capital: As a limited company owner, you can sell investment shares in the business to raise capital essential for financial growth.
• Dividends: Shareholders can take income through dividends, which are taxed at a lower rate than a salary. By balancing salary and dividends, directors can structure their income with tax-efficiency in mind.
• Credibility: Operating as a limited company can strengthen a business's professional image. Many clients, suppliers, and creditors prefer to deal with limited companies because they appear more established and trustworthy.
• Limited Liability: A limited company is recognised as a separate legal entity from its directors and shareholders. This means that shareholders' assets are generally safeguarded from the company's debts and liabilities in case of financial difficulties or legal issues.

For many entrepreneurs and sole traders, these benefits make setting up a limited company a smart, efficient, and secure way to operate their business.

How To Set Up a Limited Company in the UK

Creating your own limited company isn't complicated or daunting when you know what to expect.

Step 1: Confirm That Setting Up a Limited Company Is Right for You

Before registering a limited company, you should carefully consider this structure's advantages and potential disadvantages. Our recent article provides more information on the pros and cons of operating as a limited company.

Once you are confident that this business model is right for you, you're ready to take the next step.

Step 2: Choose A Company Name

When you register a private limited company, you will be asked to choose a name for your business. This step should be carefully thought through, as the name that you choose will be on public record and visible to potential creditors, suppliers, and clients. Here are some things to consider when choosing a company name:

• A business name cannot be the same as any other registered company in the UK.
• A business name can't contain more than 180 characters.
• A business name can't suggest a connection with HM Government, a devolved government, or a public authority.
• A business name cannot contain any offensive or sensitive words.
• A business name cannot infringe on any registered trademarks.

To check if a company name is available, use HMRC's Company Name Availability Checker.

Step 3: Determine Your Directors and Company Secretary

To form a limited company, you need at least one director. To begin with, this can be yourself. However, you might want to appoint other directors to help you run the business. Directors must act in the company's best interests, which includes considering the long-term success of the business, its shareholders, employees, customers, and other stakeholders, so make sure you appoint a director you can trust.

Step 4: Appoint Shareholders

When registering a limited company in the UK, you must provide details of any shareholders. Shareholders are individuals or entities that will own shares in your company. These shares represent ownership in the company and shareholders are typically entitled to a portion of the profits (known as 'dividends') and have voting rights in decisions about the company.

Step 5: Choose Your Registered Address

You must legally provide a registered address when setting up your limited company. This is the official address of your limited company, where all formal correspondence from government bodies such as HMRC and Companies House is sent.

This address is publicly accessible. It must be an actual physical location within the UK and should be sorted before registering your business. If you don't have a physical office and want to keep your home address private, you can use our Registered Address service, which provides all the benefits of having a professional address as your company's official registered office while protecting your location.

Step 6: Identify Your SIC Code

A Standard Industrial Classification (SIC) code is a five-digit reference number used by banks, creditors, and government agencies like Companies House and the Office for National Statistics to categorise a business and identify its activities.

The SIC code list on Company's House consists of 21 expansive business categories and over 600 individual codes, so you're guaranteed to find at least one SIC code that accurately describes the nature of your business. Below are some examples of SIC codes and their respective industries:

• 45112 - Sale of used cars and light motor vehicles
• 47610 - Retail sale of books in specialised stores
• 56210 - Event catering activities
• 68100 - Buying and selling of own real estate
• 73110 - Advertising agencies

When registering a company, you must choose the SIC code that most accurately reflects your company's principal business activities. If your company engages in more than one type of business, you can select multiple SIC codes (up to four). You can find the code(s) relevant to your company in this condensed list of SIC codes.

Note: Even if a company is dormant (99999) or non-trading (74990), it must still provide the appropriate SIC code.

Step 7: Familiarise Yourself with Legal Requirements

Running a limited company involves much more administration than operating as a sole trader, so familiarising yourself with the legal requirements before registering your new business is essential. As a limited company owner, you're required to maintain company records to comply with legal and regulatory obligations, including:

• Filing the company's annual financial statements with Companies House.
• Maintaining accurate records of accounts, including incomings, outgoings, and investments.
• Paying your company's corporation tax by the deadline, typically nine months and one day after the accounting period (that your financial year) ends.
• Submitting an annual return to Companies House, including information about the directors/secretary, registered office address, and share capital.
• Submitting your company's annual corporation tax return (CT600) to HMRC.
• Registering the company for VAT if its taxable revenue exceeds £85,000 over a twelve-month period.

You must keep all company records on file for at least six years from the end of the last company financial year they relate to.

Step 8: Prepare Your Documents

Before registering your business with Companies House, you must prepare two types of legally binding documents that specify how you will run your limited company:

• Memorandum of Association (MoA): This is a legal statement signed by all initial shareholders (also known as 'subscribers') agreeing to form the company.
• Articles of Association: These are written rules that outline how you intend to run your company, what shareholders are entitled to, and what controls the directors have.

You don't need to create your own versions of these documents from scratch. For ease of use, here are the Memorandum of Association (MoA) and Articles of Association templates.

Step 9: Register Your Business

Once you are satisfied that you have completed the above steps and have all your documentation and information to hand, you can register your business on Companies House. This process can take anywhere from a few hours to a couple of days.

Need help? If you want to set up a limited company quickly without the administrative steps, why not let us take care of the process on your behalf? We have provided simple and efficient business formation services for forty years. With our All-In-One Company Formations Package, we take care of the entire incorporation process on your behalf. Simply purchase the package here, and we will file the required documentation with Companies House.