01 February 2022

What you’ll need to set up a limited company

What You’ll Need To Set Up A Limited Company

What you’ll need to set up a limited company

There are many factors to consider when setting up a limited company; we have compiled a checklist and relevant links to support the process.

  • A company name
  • Directors & a company secretary
  • Shareholders and identify people with significant control, (PSC)
  • Memorandum of Association and Articles of Association
  • A registered office address
  • Your Standard Industrial Classification, (SIC), Code
  • Make sure you’re aware of what records you have to keep
  • You’re now ready to register your company
  • Once you have all this you can
  • The advantages of setting up and trading as a limited company
  • The disadvantages of setting up and trading as a limited company
  • Further reading

A company name

Directors & a company secretary

  • Company directors are responsible for following the company rules set out in the articles of association, keeping company records, filing accounts and tax returns, paying corporation tax, and declaring any conflict of interest to other shareholders.
  • You no longer have to appoint a company secretary for a small business, but if you want to, they can take some director’s responsibilities over.
  • More information here – Set up a private limited company: Appoint directors and a company secretary – GOV.UK (www.gov.uk).

Shareholders and identify people with significant control, (PSC)

Memorandum of Association and Articles of Association

A registered office address

  • This is where any written communication will be sent to your company, so it must be a physical address.
  • It must be in the country of your registration, e.g. if you’re registered in England, the registered office must be in England.
  • You can use your home address but be aware that it will be publicly available.
  • Small businesses usually use an agent or their accountant, but you must get their permission first.
  • More information here – Set up a private limited company: Check the rules for company addresses – GOV.UK (www.gov.uk).

Your Standard Industrial Classification, (SIC), Code

Make sure you’re aware of what records you have to keep

  • Company and accounting records must be maintained and retained for potential future inspection.
  • You can use an accounting firm to keep company records for you, but you must tell Companies House if this is different to your registered address.
  • Every year, all companies have to complete a Confirmation Statement (also known as an Annual Return) to maintain the company records and notify of any changes.
  • You must keep records of all financial transactions, including payments made and received, company-owned assets, and dividends paid.
  • Accounting records are used to submit annual accounts to Companies House and for tax calculations.
  • More information here – Running a limited company: Company and accounting records – GOV.UK (www.gov.uk).

You’re now ready to register your company

Once you have all this you can

The advantages of setting up and trading as a limited company

  • Tax Efficiency – shareholders can take a minimal salary then top up with dividends from available profits which are not subject to National Insurance.
  • Anyone can be a shareholder – such as family members who can take advantage of tax efficiencies when dividends are paid and have a share of the business. This is a good option to add a spouse without setting up two different limited companies.
  • Limited Liability – you are not liable for the business’s debts – your personal assets and finances are protected.
  • Separate Legal Entity – a limited company is an entity in its own right – it can enter into contracts and has Liability for business actions.
  • Professional Image – adding Ltd to the end of the company name indicates credibility.
  • Registration is a fairly straightforward process – you can use sample articles and register online for just £12.
  • Simple transfer of business ownership – shareholders and directors can change whilst the company trades on.
  • Business name is protected – nobody can trade under your registered name as another limited company.

The disadvantages of setting up and trading as a limited company

  • More complicated setup – have to be registered with Companies House and HMRC and have rules to adhere to.
  • Accounting complexities – all transactions must be recorded for year-end accounts and taxation. Year-end accounts have to be signed off by a qualified accountant along with tax calculations and submitted to Companies House within nine months of the year-end.
  • Information is in the public domain – all your limited company’s information (including shareholders, directors and submitted accounts) is available on the Companies House website.
  • Cost of administration – accountants, submissions to Companies House, retaining a dormant company name, and closing a limited company all come at a cost.
  • Funders may ask for a personal guarantee – even though you and the business are separate entities, funders – mainly banks – may ask for a personal guarantee before approving funding.
  • Shareholders with voting rights can have a say in how the company is run.

Further Reading