Set up a limited company in the UK: A step-by-step guide

Ready to take your business to the next level by forming a limited company? Here’s a step-by-step guide to the company formation process:

1. Choose a company name

Your limited company name must be unique and not too similar to existing company names. Some other key rules:

• It can’t contain sensitive words or expressions
• It can’t suggest a connection with government or local authorities (unless you get permission)
• It must usually end in “Limited” or “Ltd”

We recommend checking the Companies House register to make sure your chosen name is available. You can also check the trade marks database to avoid infringing on anyone’s intellectual property.

2. Choose directors and a company secretary

Every limited company must have at least one director who is a natural person aged 16 or over. A company secretary can be appointed but is not required for private limited companies. Directors are legally responsible for running the company, preparing accounts, and filing annual accounts and confirmation statements with Companies House. Make sure to appoint people who understand their duties and are up for the task.

3. Identify people with significant control

You’ll need to keep a register of people with significant control (PSC) over your company, such as anyone who:

• Owns more than 25% of shares
• Holds more than 25% of voting rights
• Has the right to appoint or remove a majority of directors

This information must be provided to Companies House as part of the incorporation process and updated annually in the confirmation statement.

4. Prepare documents agreeing how to run your company

You’ll need a memorandum of association (which states that the subscribers agree to form the company) and articles of association (written rules about running the company agreed by the shareholders, directors and company secretary). Most companies use standard model articles, but you can choose to write your own or modify the model articles. Either way, these documents are filed with Companies House as part of the registration.

5. Choose a registered office address

Every limited company must have a physical in the UK. This is where official communications will be sent (like letters from Companies House or HMRC). The address will be publicly available, so many companies choose to use their accountant’s or formation agent’s address rather than their home address.

6. Check if you need a SIC code

You may need to provide a Standard Industrial Classification (SIC) code when you register your company. SIC codes identify the nature of your business, so HMRC knows which taxes apply to you. You can find your SIC code on the government website. Most companies only need one code, but you can choose up to four if your business spans multiple categories.

7. Register your company

Once you have all your ducks in a row, it’s time to officially register your company with Companies House. You can do this online or by post. The registration fee is £50 for the standard service or £78 for same-day registration. You’ll need to provide:

• Company name and registered office address
• Articles of association
• Details of directors, PSCs and shareholders
• Statement of capital and initial shareholdings
• SIC code(s)

Most companies can also register for Corporation Tax at the same time. If you can’t, you’ll need to register separately with HMRC within 3 months of starting to do business.

8. Get a certificate of incorporation

Once your company is registered, Companies House will send you a certificate of incorporation. This confirms that your company legally exists and shows your company number and date of formation. With your certificate in hand, you’re ready to start trading as a limited company. Exciting times.

What to do after you’ve registered your limited company

Congratulations, you’re now the proud owner of a limited company. But the work doesn’t stop there. Here are some key things to take care of once you’ve registered:

Set up a business bank account

Your limited company is a separate legal entity from you, so it needs its own bank account. Shop around for the best deals and look for an account with low fees and good online banking features. To open an account, you’ll typically need to provide:

• Certificate of incorporation
• Proof of identity for directors
• Proof of address for the company

Some banks also ask for a business plan and financial projections, so it’s good to have those ready.

Register for corporation tax

If you didn’t register for Corporation Tax when you incorporated, you’ll need to do so within 3 months of starting to trade. This is done through HMRC. You’ll need your company’s 10-digit Unique Taxpayer Reference (UTR), which is issued after incorporation. HMRC will use this to set up your company’s Corporation Tax record and send you a ‘Notice to deliver a Company Tax Return’.

Register for PAYE and national insurance

If your limited company will have employees (including directors), you’ll need to register as an employer with HMRC and set up Pay As You Earn (PAYE) to deduct income tax and National Insurance contributions from their pay. You can register online and will receive an employer PAYE reference number to use when reporting payroll information to HMRC. You’ll also need to pay Employer’s National Insurance for any employees earning over £183 per week.

Register for VAT

If your limited company’s taxable turnover will be more than £85,000 per year, you must register for VAT. This means charging VAT on your goods and services and filing quarterly VAT returns. You can also voluntarily register for VAT if your turnover is below the threshold. This can be beneficial if you sell to other VAT-registered businesses and want to reclaim the VAT.

Get business insurance

Don’t neglect insurance when setting up your limited company. Some key types to consider:

• Professional indemnity insurance
• Public liability insurance
• Employers’ liability insurance (if you have employees)

Talk to an insurance broker or do some online research to find the right policies for your business. Having adequate coverage is essential to protect your company from potential losses.

Keep accounting records

As a limited company director, you’re legally required to keep accurate financial records. This includes:

• Details of all income and expenditure
• Details of all assets owned by the company
• Details of debts the company owes or is owed
• Details of stock the company owns
• Details of goods bought and sold

You must keep these records for at least 6 years from the end of the last financial year they relate to. Many companies use accounting software to make this easier, but you can also keep manual records if you prefer.

Send confirmation statement to companies house

Every year, you must file a confirmation statement with Companies House to confirm that the information they hold about your company is correct. This is due within 14 days of the anniversary of your company’s incorporation. The confirmation statement costs £13 to file online or £40 by post. You’ll need to provide information about your:

• Registered office address
• Directors and company secretaries
• Shareholders and share capital
• People with significant control (PSCs)
• Standard Industrial Classification (SIC) code

Make sure to file your confirmation statement on time to avoid penalties. I’ve found it helpful to set a reminder in my calendar so I don’t forget.

Key Takeaway: 

Picking the right company name is more than a creative exercise; it’s about avoiding legal headaches. Check for trademarks and sensitive words to save yourself trouble later. Understanding shares, their types, and rights is crucial in setting up your limited company correctly. And remember, being a director means big responsibilities; always stay informed and seek advice when needed.

Conclusion

Phew! We’ve covered a lot of ground in this limited company set up journey. From picking a killer name to tackling the paperwork, you’re now equipped with the knowledge and confidence to make your business dreams a reality.

Your limited company is up and running, but don’t stop there! A whole world of opportunities is waiting for you to grab them by the horns. You’ve got the expertise, now it’s time to put it into action. Embrace the challenges ahead and watch your business soar to new heights.

Familiarize yourself with your responsibilities and processes mentioned in this guide. Seek professional advice for a smooth and hassle-free process. If you require professional assistance to register and start a business, speak to our friendly experts at Sleek. Trusted by over 450,000 small and emerging businesses, Sleek is a go-to platform for business registration, accounting, bookkeeping, advisory services, tax compliance services, and more.