The actual act of forming a limited company isn’t a tricky one but before taking the plunge and incorporating there are a number of things you need to consider. We go into the steps of setting up a limited company below, covering off everything that needs to be thought about in advance.
Consider company structure
So you’ve thought long and hard about it and decided to set up a new business. But are you sure that a limited company is the right structure for your new business venture?
It’s worth speaking to an accountant before you go ahead and register a limited company if you’re in any doubt.
Assuming a limited company is right, have you considered the type of limited company?
There are two options to consider:
- Public Limited Company (PLC)
- Private Limited Company (LTD)
On the whole, the vast majority of startups & small businesses will set up a private limited company as there are certain requirements to set up a PLC.
For example, to set up a PLC, you’d need:
- A minimum of £50,000 of share capital
- At least two shareholders
- At least two company directors
- A qualified company secretary
Whereas LTD formation is much simpler, there’s no formal shareholder requirement, only one company director is needed and there’s no requirement for a minimum share capital.
Name your company
Now this sounds like the fun bit and it is – but there are a few rules to follow to ensure you don’t end up with something unusable!
- Ensure it’s not the same as, or too similar to a company name that already exists. Once you have a name in mind, check it’s available – You can do this by heading here: company name checker
- Don’t pick a name that’s offensive.
- As stated on Companies House your name can’t ‘contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities unless you get permission.
- Ensure the name has Limited or Ltd at the end. There are some exceptions to this rule, head to Companies House for more information. Typically at Raw, we incorporate companies with the full Limited as they can always be abbreviated to LTD whereas if you incorporate with LTD you cannot use the phrase Limited.
Consider whether you require bespoke articles of association.
What are articles of association?
In simple terms, they are the rules that the company officers must adhere to when running the business.
Examples of articles of association include:
You can find the current model articles here at Companies House. They are often suitable for many small businesses but there are also times when you may require bespoke articles.
Why might I require bespoke articles of association?
When you register your company with Companies House the default or model articles will be used. You may find these standard articles don’t work for your company and would prefer to create your own, bespoke version.
What’s the difference between articles of association and memorandum of association?
The articles of association are the written rules about running the company agreed by shareholders, directors and a company secretary.
The memorandum of association on the other hand is a legal statement signed by all the initial shareholders agreeing to incorporate the company.
These days, if you register online, you do not require a written memorandum of association as it is created automatically as part of the formation.
Decide on company officers and shareholders
You will need to decide on the director(s) of the business and company shareholders.
What’s the role of a director?
- Responsible for running the business.
- Responsible for ensuring accounts, corporation tax returns and confirmation statements are filed timely with Companies House and HMRC.
- Must follow the rules set out in the articles of association.
- Keep company records up to date.
What’s the role of a company shareholder?
- Provide financial support to the business.
- Whilst day to day running of the business is managed by directors, a shareholder does have a say in how the business is run.
- Receive a percentage of company profits when dividends are declared.
Decide on your registered office address
A limited company is required, by law, to register an official registered office address at Companies House. This is an official address and important communications such as letters and reminders from HMRC and Companies House along with any government updates will be sent here. Our blog, ‘registered office address – what is it and why do you need one?’ covers important points to consider when choosing a registered office address so do take a read!
You also need a service address for company directors and a contact address for anyone who is a person with significant control (PSC). This can be the same as the company’s registered office, an individual’s home address or somewhere else.
Are you going to incorporate yourself or do you want a specialist?
It’s important to reflect on whether you want to incorporate your limited company yourself or whether you’d prefer to seek the support of a formation agent, such as your accountant.
Can I set a limited company up myself?
Yes, the process isn’t a complicated one and it’s something you can do yourself. However, support with incorporation can bring benefits, such as:
- Saving you time
- Reducing the risk of mistakes being made
- Providing you with guidance throughout the process
Register your company
If you’ve decided to register the company yourself you can do this here, via Companies House.
If you’ve decided to take on the support of a professional they will deal with all steps involved with incorporation for you.
Once registered things to consider
There will be several things to consider once you’ve formed your company, particularly when it comes to accounting, such as setting up a business bank account to the right accounting software to use for business! Keep an eye on our blog page, as we’ll soon be publishing a blog on this exact topic.
At Raw, we support clients by incorporating limited companies. If you’re thinking about setting up a limited company we can incorporate your company for free when sign up for our monthly accounting services. We’re experienced in supporting limited company business owners through the incorporation process and beyond. Do get in contact today.
FAQs related to how to incorporate a limited company
What is a limited company?
In a nutshell, a limited company is a distinct entity, meaning it exists separately from its owners. This structure therefore offers the company director and shareholder more protection as it limits their liability should things go wrong, as their income and assets exist independently.
How do I incorporate a limited company?
We’ve covered all the steps you need to consider when incorporating a limited company in our article above.
What is required to form the company?
If you are completing the company formation yourself, then you will be guided through the information you need to provide via Companies House or an online formation agent. Companies House state you will require at least 3 pieces of personal information about yourself and the shareholders, for example:
- Town of birth
- Mother’s maiden name
- Father’s first name
- Telephone number
- National insurance number
- Passport number
Do you need money to start a limited company?
No, as mentioned above to set up a Private Limited Company (LTD) there’s no requirement for a minimum share capital so you can incorporate a company with £1.
How much does it cost to set up a limited company?
To incorporate your company online via Companies House costs £12. Should you seek the support of a formation agent, the cost will vary depending on the professional you use. At Raw we charge £30 for limited company incorporation (which includes the £12 Companies House cost) but we remove this £30 fee for those who sign up to our monthly accounting services.
