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So, you’ve decided to take your business to the next level and set up as a limited company. Congratulations—you’ve made a decision that will allow your business to be as tax efficient as it can be.

The next step, of course, is actually getting your limited company registered. At first glance the whole thing can seem quite daunting. However, with the right information and a little bit of patience you’ll be able to get everything sorted in no time.

To get you on the right track, we’ve put together this straightforward guide on how to set up as a limited company in 8 easy steps.

 

1 – Decide between a private limited company and a public limited company

There are two types of limited company in the UK: private and public. Both are owned by the shareholders who invest in them, and both must be registered with Companies House.

However, there are some key differences between these two types of company. A public limited company must have a minimum of £50,000 of share capital, whereas a private limited company doesn’t have any minimum. In a public limited company, there is no need to consult the owners for selling and buying shares, but shares in a limited company can only be bought and sold if all the shareholders agree.

In most cases, a private limited company is the preferred option for new contracting businesses.

 

2 – Get informed on the legal requirements for limited companies

There are several legal hoops that you’re required to jump through as a limited company. The fundamental one is that any limited company must have at least one director in place.

Every company director is required to file an annual return and submit annual accounts with Companies House, and submit an annual corporation tax return to HMRC.  You’ll also have to be registered for VAT (and submit quarterly VAT returns online) if the business turnover exceeds the VAT threshold—that’s currently £85,000 for April 2020.

 

3 – Make sure you have a business bank account in place

If you’re operating as a limited company, then it’s highly recommended that you have a business bank account in place. The business is a separate legal entity to its directors, so it’s finances cannot be run through your personal bank account.

As you’d expect, there’s a huge range of business banking options available. We’ve written a guide that covers everything you need to know; check that out here.

 

4 – Choose a business name

Choosing a name for your business sounds like it should be relatively simple, but there are a few things to think about:

  • Remember that your business name will (hopefully) be around for a long time, so don’t go for something just because it’s fashionable today
  • Think about how your name will work as a website URL, as well as part of a business email address
  • Keep it flexible! You might be specialising in agile IT infrastructure for the construction trade right now, but it’s probably best not to build a name on something so niche.

 

5 – Choose your company directors

Your limited company is legally required to have at least one director. If you operate your business alone, then it’s simply a case of setting yourself up as a director. If your business has more than one person involved, then you’ll need to decide whether everyone will become a director, or some will be employed.

It’s worth noting that you do not need a company secretary for a private limited company.

 

6 – Choose a registered address for your company

All limited companies must have a registered address. Many directors will simply use their office or home address, but others choose to have their company registered at the address of their business accountant. There are two main reasons for this: Firstly, official documentation pertaining to the company will get sent straight to the accountant to be dealt with. Secondly, by using your accountant’s details, you can keep your home address out of the public domain, as all limited company addresses are publicly available via Companies House.

 

7 – Complete the required documentation for a new limited company

Before you register your shiny new business at Companies House, there are three key documents that you’ll need to fill out:

  • Memorandum of Association
    • This will include details such as the company name, names and addresses of subscribers to the business, and the location of the registered office
  • Articles of Association
    • Here, you’ll outline the powers and responsibilities of directors, as well as how the company is going to be run
  • Form IN01
    • This form captures the details of directors, shareholders, and a statement of compliance

 

8 – Register your limited company

Okay, now the fun part. You get to register your company. There are three main ways that this can be done: by registering online yourself through the Companies House website, by using a formation agent to do everything for you, or by getting your accountant to do it on your behalf.

Each method has its pros and cons, but there are many benefits to using an accountant, particularly the fact that they’ll be able to set everything up as part of a service that goes beyond just company formation. You can find a list of our recommended accountants here.

We hope you’ve found this guide helpful, and we wish you all the luck in the world with your new company. If you’re looking for more advice, guidance, and tips on building a business, you can find a full list of resources here.

 

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