How to set up a Limited Company
Do you want to know how to set up a limited company?
This post explains:
- The things you should consider before setting up a limited company
- How to structure your limited company
- How to register your limited company TODAY!
Table of Contents
Why do you want to set up a Limited Company?
Before setting up your company. You must know why it is the right business entity for you and your business.
Reasons to set up a Limited Company
The main reason you should be setting up a limited company is to protect yourself from liability. Limited liability status is said to go back as far as the 15th Century. It was supposedly given to communities of monks and merchants with commonly owned property, like churches and ships.
By setting up a limited company the owners shield themselves from liability should anything go wrong.
Some other reasons for setting up a limited company are:
- Possible tax reduction
- A recognisable corporate status
- Protect your business name
Other things limited companies offer their owners are:
- A unique identity and brand
- The ability to raise capital by issuing shares in the company
- The option to sell your shares when you no longer want to be an owner of the company
However, these opportunities can also be obtained by individuals or partners in a partnership, just in slightly different ways.
Take a look at the video below by Darren from Honest Money. It explains the advantages and disadvantages of starting a limited company.
Ensuring a Limited Company is right for you
If you have found yourself agreeing to most, or even some of the above. Please read this next part before rushing over to Companies House and registering your company.
Now that you know the reason you want to set up your company. You need to consider if a limited company is right for you, and what you plan to achieve. If you want to achieve some of the things on the list below. A company will likely be the right choice for you.
- Generate high levels of turnover and profits for example, £200,000 and £10,000 respectively
- Earn a salary and have employment benefits, like an employer pension
- Employ others, especially family
- Buy or develop other businesses
- Having other streams of income, like rents and dividends etc
- Sell your businesses on one day further down the line
Plan Your Company Structure
Before registering your company with Companies House. You will need to plan your company structure. You will need this information when completing your application.
Choosing A Company Name
When choosing a company name you need to consider the following:
- The future of your business and what it will look like when its built
- The message you want your company to give, its brand
- Other companies with the same name or similar
Use the Companies House name availability checker here.
Individual Company or Group of Companies
You will need to consider the structure of the business and therefore consider what it will look like when complete.
If you plan to do things like, own valuable property and equipment. Buy other businesses. Operate in other countries. You will probably end up with a group of companies.
So, you may then want to consider setting up a group holding company.
Holding companies allow you to do the following:
- Reduce risk
- Protect assets
- Access tax reductions
- Share costs
Depending who is involved in managing your business from the start. Plus, who you might require getting involved in the future. Is going to help you decide its management team.
Directors are the senior management team within a business. For larger companies. These are the people who oversee the decision makers. They may not necessarily have ownership in the company.
For smaller companies these tend to be the owner / managers of the business.
Directors have a responsibility to make sure the company is run correctly. They also have a legal duty under the Companies Act 2006. To ensure information is filed correctly and on time with Companies House deadlines.
You need to consider who is going to be on your board of directors and ensure they are happy to do so.
Company secretaries are not required for private limited companies. However, some private limited companies opt to have them. They can take on some of the administration responsibilities off the directors.
Whoever is going to invest their time and money in getting the business to its end position. Will result in the type of ownership structure you decide to take.
Even if you are going to have a group structure. The ultimate parent company or holding company will more than likely be owned by individual shareholders. These will be the people who invest their own time and money into getting the business up and running.
Consider how much each of you are all willing to invest and what the shareholdings will be for each individual investment. Especially, if you are not all investing equal amounts of time and money.
People with Significant Control
Anyone who is going to have more than 25% of the ordinary share capital. Therefore, will have more than 25% of the voting right, will be a person with significant control.
Anyone who is a person with significant control needs to be identified. Companies House will need to be informed of all persons with significant control.
Agreeing How Your Company Is to Be Run
The ownership structure will tend to determine how easy it will be to agree how the company will be run.
There are two documents that need to be agreed prior to registering your limited company and these are:
- Memorandum of association
- Articles of association
Memorandum of Association
This is a legal statement signed by all initial shareholders or guarantors. It is an agreement to form the company. If you register your company online. This document will be created automatically as part of the registration process.
Articles of Association
These are the written rules about running the company. It is agreed by the shareholders or guarantors, directors, and the company secretary. You can use the standard articles which are known as model articles, or you can write your own and upload them. When you register your company.
Registering Your Company
Here are a few ways you can register your limited company:
- Directly with Companies House
- Register with a formation agent
- Ask an accountant to register your company
Register with Companies House
Registering your company with Companies House can be quick and easy. If you know what you are doing and have all the information to hand. Registering a company will cost you £12. Some reasons you will not be able to register directly with Companies House are:
- Unable to pay for incorporation with a credit or debit card
- If the company is taking over another business [If you are taking over another limited company or incorporating from a sole trader or partnership]
- If any of the directors or persons with significant control are on the secure register [The secure register is for victims of threatening behaviour or violence. Who cannot risk having their home address on the public register].
Take a look at the video below. Once you have watched the video. Click the button below to go and register your company with Companies House.
Register with A Formation Agent
Ask MAR Accountancy to Register Your Company
Asking us to register your company is easy and could save you time and money. We will register your company and ensure it is all done correctly. You will also get the following:
- Business start-up checklist
- Digital forms including first board meeting meetings
- Registered office address (Usual cost £25)
- Directors service address (Usual cost £25 per director)
- Incorporation Certificate
- Share certificate
- First year confirmation statement prepared and filed (Usual cost £25 per return)
- Memorandum and Articles of Association
- VAT & PAYE registration (Usual cost £85 per registration)
- £120 discount off our bookkeeping services
It is a simple three stage process to get started.
Stage 1: Book A Call with One of Our Team
Book a call / video call with one of our team to discuss the incorporation process and complete our registration form.
Stage 2: Send Your Payment to Register
Once you have completed the registration form you will receive an invoice. Once this invoice is paid, the application will be prepared and submitted. You will receive an email once the application has been submitted.
Stage 3: Receive Confirmation and Documents Once Your Company Has Been Set Up
Once we receive confirmation that your company has been incorporated. You will receive an email to confirm this. It will have attached your company’s incorporation documents.
You should now know if a limited company is right for you. Have an idea of you company’s structure. Plus, most importantly, know how you will register your company.