Setting up a limited company is a great way to take your spirit of entrepreneurship to the next level. It gives you control over your brand, allows you to run a business in a tax-efficient way, and limits your personal liability in the professional sense. Although just about anyone can set up a limited company, there is some legwork involved.
We’ve outlined everything you need to know about registering your company with Companies House. The entire process can be completed online, and there are a few steps you need to take:
1. Choose Whether a Limited Company is Right for You
Depending on the type of work you do and the business you’re in, you may or may not choose to set up a limited company. This type of business is either limited by shares or by guarantee. The former is for companies that make a profit. It means your organisation will be legally separate from you and will have its own finances, as well as have shares and shareholders. Any money it makes after tax can be kept.
A company limited by guarantee is for companies that are ‘not for profit’. Although these are also legally separate with their own finances, it also has guarantors and a ‘guaranteed amount’, and any profits must be reinvested in the company.
There are a number of rules surrounding what you can call your company. It can’t be the same as an existing business or trade mark. Additionally, it can’t be too similar to another company. Thankfully, with the Companies House name checker, you can easily check the availability of your choice.
When you register your name, you’ll also need to register an address. This location will be where HMRC send all of their communications. It doesn’t have to be the same as where the business is based, but it must be in the UK and be a real address.
3. Choose a Director and Company Secretary
All companies need at least one direction. This is the person who is legally responsible for operating the company. They also have to make sure all the accounts and reports are prepared. This person can be you. There are a few requirements that directors must meet:
They have to be over 16 and not previously have been disqualified from being a director.
For private limited companies, you don’t need to register a secretary. However, it can be useful to have them share the responsibilities with you. It can be the same person as the director, but it cannot be:
An auditor for the company
Someone who is classed as an undischarged bankrupt.
4. Designate Shareholders
One important document you’ll need to register is a statement of capital. This gives details of how many shares you have in your company and how much they’re worth (known as the share capital). You’ll also need to give the names and addresses of all shareholders. As the director, you can hold shares in your company. This is important, as the number of shareholders determines how dividends are paid out.
5. Prepare a Memorandum of Association and Articles of Association
These two documents are the rules and written statements agreeing how the company will be run. All initial shareholders need to sign the memorandum of association, while all directors must approve the articles of association.
If you register your company online, the memorandum of association is completed automatically. If registering online, you can use a template to create it. For the articles of association, you can either use the standard articles or create and submit your own.
6. Sort out your tax affairs
After setting up your company, you’ll need a Unique Taxpayer Reference. To get this, you have to give HMRC details of when you started your business and the date your accounts will be posted. You’ll need to keep a variety of records about your company and its performance so that HMRC can work out how much tax you owe. You can either do this yourself or hire an accountant to do it for you.