How To Set Up A Limited Company? If you are looking to set up a limited company but don’t know how to go about it, this content will guide you on how to successfully register a limited company, including how to choose a name and prepare your documents.

How To Set Up A Limited Company

How To Set Up A Limited Company

What is a limited company? A limited company is a type of legal structure for your business. Limited companies have a legal identity separate from that of their directors and shareholders (unlike sole traders). They are also able to take on more risk than sole traders, who are personally liable for business debts that build up when things go wrong. Furthermore, setting up a limited company does come with added paperwork and responsibilities, making it time-consuming to run.

Steps to Set Up a Limited Company

Follow these steps (and questions to ask) when setting up a limited company.

  • Find out if setting up a limited company is best for you.

You should work out whether you need to set up a limited company in the first place. Being a sole trader is the most common legal structure for businesses in the United Kingdom. It’s much easier to set up as a sole trader and it comes with relatively few legal responsibilities, meaning it suits businesses that want to get started quickly. However, sole traders have unlimited liability, which means they’re personally liable when something goes wrong.

  • Choosing a Name for your Limited Company

You should know that two separate limited companies can’t have the same name, so you’ll have to come up with an original name for your business. Have it in mind that Companies House won’t allow anything offensive. They also have a list of sensitive words and phrases you can’t use.

And as the world moves online, it’s important to check whether the name is available to use as a URL (you can do this using a domain checker).

  • You Should Have to Know the Number of Limited Company Directors

A limited company needs at least one director (someone responsible for running the company), although there’s no limit on the number of directors a company can appoint. When setting up a limited company, the director must be 16 or older, and their responsibilities will range from legal to financial. Moreover, the U.K. Gov. says that as a director you must:

  • Try to make the company a success by using skills, experience, and judgment.
  • Abide by the company’s rules as shown in its articles of association.
  • Always make decisions for the benefit of the company, not yourself.
  • Inform other shareholders if you might personally benefit from a transaction the company makes.
  • Always keep company records and report changes to Companies House and HM Revenue and Customs (HMRC).
  • Ensure that the company’s accounts are a “true and fair view” of the business’s finances.
  • File a company tax return and pay corporation tax.
  • Enroll for Self Assessment and send a personal Self Assessment tax return every year unless you run a non-profit organization (like a charity) and you didn’t get any pay or benefits, like a company car.

By avoiding the above responsibilities, you could end up facing penalties and even prosecution, so ensure you’re prepared to meet them before you incorporate them.

  • Decide on your shareholders.

The company needs at least one shareholder. And they can also be directors. As a small business, this might mean you will be the only shareholder. However, if your business only has one shareholder, that shareholder owns 100% of the company. So there’s no limit to the number of shareholders a limited company can have.

When you enroll your limited company, you need to give details about the shares and how they’ve been issued. So, you should state:

  • The number of shares and their total value (your company’s “share capital’)
  • The names and addresses of your shareholders are

It’s very common for new small limited companies to issue 100 £1 shares and pay £100 into the company bank account when incorporating. Thus, you can divide this if you have more shareholders. It simply means the company is divided equally between the two shareholders, but you could also split it unevenly if you wanted to.

  • Identify a person with significant control.

You need to identify people with significant control (PSC) in your business and tell Companies House about them on your company’s PSC register.

According to Companies House, PSCs are likely to be people who have:

  • More than 25 percent of shares in the company
  • More than 25 percent of voting rights in the company
  • The right to appoint or remove the majority of the board of directors.


  • Prepare a memorandum and articles of association.

These are the articles that say how you’re going to run your limited company. The memorandum of association is the legal document that all your initial shareholders sign, accepting the company. It’s created automatically when registering your company online.

The articles of association contain rules about running the company, agreed on by the directors and shareholders. You can use model articles as a template or create your own.

Why set up a Limited Company?

There are a good number of benefits of being a limited company over a sole trader. They include the following:

Separate Legal Identity – this means the company is liable when things go wrong, not you personally-you’ll only lose what you put into the business.

More Professional – Some businesses might be seen as more professional by others in their industry when they run as a limited company – this can make it easier to secure suppliers, investment, and eventually sell the business

Taxefficiency: you can pay corporation tax through your business and you can pay yourself in salary and dividends.

How much does it cost to set up a Limited Company?

It costs £12 to register your limited company through Companies House online (and more by post), but if you’re new to the process, you may need to hire an accountant or adviser to help with the paperwork.

The day-to-day running of your business can cost money too, for instance in continued professional advice or software to keep accurate records.

How long does it take to set up a Limited Company?

Setting up a limited company house online doesn’t take long to register. Once you have everything ready, including the required documents, you can do it in a matter of minutes and you’re usually registered within 24 hours. However, postal applications take eight to ten days.

Though it may take you some time to fill in the paperwork needed, Moreover, having a business plan should help you organize your to-do list and work out how much time you need to get going.


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