Setting up as a limited company can be one of the most tax-efficient ways to start a new business in the UK.
Most limited companies operate either as a public limited company (PLC) or private limited company (LTD).
Each option comes with their own responsibilities, but you probably know that already if you’ve read our blog about choosing a business structure.
If you’re reading this, you’ve probably decided on setting up a limited company and are looking for a guide on what you need to do.
If you’re unsure, take a look at this previous blog of ours to learn about the advantages and disadvantages of setting up your own company.
Choose a business name
First, you’ll want to get your company name sorted, which you must ensure is not the same as another company’s.
If your name is too similar to another company’s name or trademark, then there’s the risk you’ll just have to change it if someone makes a complaint.
For the purpose of company names, a name is the ‘same as’ another company name where the only difference is:
- certain punctuation
- certain special characters, like the ‘plus’ sign
- a word or character that is similar in appearance or meaning to another from the existing name.
You can check the availability of your proposed name here.
Note that private limited company names must have “Limited” or “Ltd” at the end, but you can trade using a different name to your registered one, which doesn’t have to follow this rule.
Directors, shareholders and PSCs
Next, decide who your company’s directors will be and how many there will be. There needs to be at least one and there’s no limit to the number you can appoint.
Directors have certain legal obligations, including keeping company records and annual accounts; reporting records changes and allotment of shares to Companies House, and drawing up the confirmation statement. Further information on director responsibilities can be found here.
You’ll also have to decide who will be your shareholders. Again, there only needs to be one. It’s important to note that shareholders and directors have two completely different roles in a company and they don’t have to be the same people. Getting this stage right will ensure you get the best protection and tax position so it’s worth seeking professional guidance with this.
Next, you’ll need to identify a person with significant control (PSC), and notify Companies House on your company’s PSC register.
Companies House says PSCs are likely to be people who have:
- over 25% of shares in the company
- more than 25% of voting rights in the company
- the right to appoint or remove the majority of the board of directors.
Prepare memorandum of association and articles of association
To register your limited company, you’ll first need:
- a memorandum of association – a legal statement signed by all shareholders agreeing to form the company
- articles of association – written rules about running the company agreed by shareholders or guarantors, directors and the company secretary.
If you register your company online, you don’t need to write your own memorandum of association, as it will be created automatically as part of your registration.
Check which records you need to keep
When running a limited company, you must keep records about the company for at least six years, including:
- directors, shareholders and company secretaries
- promises for the company to repay loans at specific dates and who they must be paid back to
- loans or mortgages secured against the company’s assets.
You must also keep accounting records, which include:
- details of assets owned by the company
- all goods bought and sold
- all money received and spent by the company, including grants and payments from coronavirus support schemes.
Register your company
If you’ve followed this guidance, you should have everything you need to officially register your company with Companies House.
You’ll just have to also know your company address and your Standard Industrial Classification code, a classification of activities that identifies what your business does.
With that information, you will then be able to register your company. Whilst this may sound like a simple process, it is important to get the structure of your company right at the start to avoid the unnecessary expense of redoing things further down the line. Seeking professional guidance may be worthwhile.
With that, you can build all the internal structures your company will need to run your business.
For a starter’s guide on what you need to do after setting up your company, take a look at our essential guide to getting your business started.
Get in touch with us to go over the company registration process in more detail.