How to Set Up a Limited Company – Why Set up a Limited Company?

How to Set Up a Limited Company: Are you planning on setting up a limited company for your business? Before you begin, there is certain information you need to know. This information includes all the pros and cons of forming a limited company and how to register your business as a limited company.

How to Set Up a Limited Company

However, this article is solely about how to set up your limited company for your business. Read on while we discuss in detail all you need to know about limited companies.

How to Set Up a Limited Company

A limited company is a business that’s limited in scope. Any new business should be one of three types: sole proprietorship, partnership, or limited company.

However, each of them has its advantages, but if you want to grow your business significantly, remove personal assets from liabilities, and employ staff, then forming a limited company is the best option. The big question here is why set up a limited company in the first place. Let’s try to answer this question in the next section.

Why Set up a Limited Company?

A limited company’s liability is just that limited. Registering and overseeing a limited company involves more paperwork and accounting than a sole trader business or partnership, but this is offset with extra protection in terms of financial liabilities.

A limited company is a legal entity. It can own property and assets, incur debts, sue and be sued, but its finances are completely separate from the personal finances of its owners.

This means that should the business fail, neither the owner nor any other individuals can be held responsible for any of its debts.

Unlike sole traders or business partnerships, a limited company is a good way to run a business without any risk to personal assets.

Also, the ownership of a limited company is divided up into equal shares, which are then allocated to each shareholder. A limited company can be set up by a single individual who will be the sole shareholder and company director, or by multiple shareholders. Let’s see the benefits of setting up a limited company.

The Benefits of Setting Up a Limited Company

There are several benefits to setting up a limited company. They include the following:

  • Liabilities such as debts or legal action. limited to the company. In general, you are protected from going personally bankrupt in the event the business fails, apart from in some rare circumstances.
  • If you plan to employ staff, it’s better to form a limited company and pay salaries.
  • Corporation tax profits are lower than the higher rates of income tax that a sole trader will pay.
  • As its own legal entity, it’s easier to sell the business later or to sell shares in the business to raise capital.
  • A limited company is perceived as a bigger, more professional organization, which is important if your clients are primarily other businesses or government organizations.

What is the difference between a Private and a Public Limited Companies?

 Private and public limited companies are owned by shareholders who are investing in the company, but there are some differences, such as;

  • A public limited company must file accounts within six months of the accounting year (nine months for private).
  • A public limited company must have a minimum of £50,000 of share capital, while there is no minimum for a private limited company.
  • Private limited companies can have just one shareholder who is also the director; there’s no maximum number of shareholders but as a private limited company, shares can’t be traded publicly on the stock market.
  • There are other necessities for a public limited company, including AGMs, the acquisition of a trading certificate before trading, and the need to have a legally qualified secretary.

Legal Requirements for Limited Companies

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

Company directors are legally required to:

  • File an annual return with Companies House. This is a snapshot of the business, including details of directors, the registered office, share capital, and shareholdings, to ensure the Company House’s records are up to date.
  • Submit your company’s annual accounts to Companies House.
  • Submit an annual corporation tax return (opens in a new window) to HM Revenue and Customs (HMRC). Corporation tax is then calculated and must be paid within nine months of the company’s accounting year-end.
  • If your business turnover exceeds the VAT threshold, currently £85,000. (April 2017), then your company must be registered for VAT and quarterly VAT returns completed online.
  • All employees of the company, including directors, must pay income tax and Class 1 National Insurance Contributions. If you operate the company payroll yourself, you must report employees’ payments and deductions to HMRC on or before each payday and then pay what you owe to HMRC monthly – although small employers may be able to pay quarterly.
  • Business advice discussion relating to how to set up a limited company.

How do I set up a Limited Company?

There are several steps involved in forming a limited company, including deciding whether to register the business yourself or use a specialist formation company; deciding on the company officers; choosing a company name, and filing registration documents with Companies House.

Choose a business name

First of all, before you register a new business as a limited company, you’ll need to decide on a name for it The new company cannot have the same name as any other registered company, or even one that’s too similar.

Go for research on Google search for business names you’re considering and search the Companies House register for a list of companies with similar names.

There are some rules that restrict the types of names you can use for your business.

The registered name cannot contain potentially misleading words such as “Chartered,” “Bank, Royal, British, English, Scottish,” or words that imply professional qualifications that you don’t hold.

Check the government guide for the rules on choosing a company name. Whichever name you choose, it must end in either “Ltd.” or “Ltd name. Whichever name you choose, it must end in either “Ltd.” or “Ltd.”

You can use a different business name than the registered company name as long as it is not the same as an existing trademark or contains a sensitive word.

Choose Company officers

All limited companies must have at least one company officer who is responsible for the business at all times.

Private limited companies need to have at least one company director too – usually, the person starting and running the limited company – while public limited companies that have publicly traded shares need at least two directors and a company secretary.

  • Company directors manage the company in accordance with its articles of association and the law. A company director is responsible for ensuring annual accounts and annual returns, as well as all notices of change, such as the registered office address, are received by Companies House. You cannot be a company director if you’re an undischarged bankrupt, have been disqualified by a court from holding a directorship, or are aged under 16.
  • Company secretaries, usually in place in larger companies, are responsible for maintaining statutory registers, keeping minutes of board meetings, and ensuring all statutory filings are completed. They’re typically professionally qualified accountants, barristers, solicitors, or advocates.

Choose How To Register A Limited Company

It’s relatively straightforward to register a limited company with Companies House yourself; you’ll need to complete a series of documents.

Alternatively, you can pay an agent to register your business for you, which is usually easier, quicker and with less chance of a mistake being made.

Register a limited company yourself.

  • Register your company with Companies House It takes 24 hours to register and costs £12 to submit your registration online.
  • You’ll need to have chosen a company name and have a UK address as its registered office. This address will be made public and is used by Companies House and HMRC to send official notices to the company. It should also appear on all company documentation, such as invoices.
  • You’ll need to submit Memorandum of Association documents online, including the names of the company’s officers, directors, and people with significant control over the company. The amount of share capital and how this is divided between shareholders; and the trading activities of the company are often referred to as the SIC Code. You can find the appropriate SIC Code from Companies House.

Using a company formation agent

There are lots of company formation agents to choose from, or you can use a solicitor to register your business. This opens in a new window. These options cost more, but they are often quicker and a specialist will be able to guide you through the information needed for registering the limited company.

You can search for company formation agents using the Companies House Company Formation Agents directory which lists the web addresses and phone numbers of recognized formation agents.

The agent will be able to offer other services, including the use of a registered office, scanning services for mail received, and online portals for managing the administration of your business details. Business documents relating to setting up a limited company

What documents are needed to form a limited company?

If you decide to register the limited company yourself or use a company formation agent, registration documents for your limited company will need to be submitted to Companies House before you can start trading.

  • A Memorandum of Association is a legal statement signed by all parties forming the company, including the names and addresses of directors and shareholders.
  • The Articles of Association are a legal document that states shareholders’ rights and the powers of company directors over the business.
  • Form IN01 is a document listing the details of the company’s directors, company secretary (if applicable), shareholders, and details of the shares issued and the share capital. Download IN01 from Companies House.

How to choose a registered office address

Choosing a registered office address is one of the criteria for registration and the directors’ service address.

Official documents or legal notices are sent to these addresses, and they are made public on the Companies House register.

What should I do after registering a limited company?

Once your company is registered, you’ll be sent a Certificate of Incorporation confirming the company’s existence and showing the company number and date of formation.

You must now register your limited company with HM Revenue & Customs (HMRC) within three months of starting trading or risk a penalty.

FAQs

Can you set yourself up as a limited company?

A limited company can be set up by a single individual who will be the sole shareholder and company director, or by multiple shareholders. The advantages of forming a limited company include liabilities such as debts or legal action.

The 5 things you need to form a limited company
  • A company name
  • Registered office address.
  • Service address.
  • At least one director
  • At least one member.
Is it worth starting a limited company?

The generally accepted benefits of company formation. Personal financial risk is greatly reduced if you trade as a limited company, as the debts of the company are separated from your personal finances. Next are tax and national insurance benefits. A limited company provides scope to pay less for each of these.

What are the disadvantages of a limited company?

Limited companies must be incorporated at Companies House. You will be required to pay an incorporation fee to Companies House. Company names are subject to certain restrictions. You cannot set up a limited company if you are an undischarged bankrupt or a disqualified director.

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