Posted March 11, 2019
A complete guide to setting up a Ltd company
A complete guide to setting up a Ltd company
One of the first big decisions to make when setting up a new business is how it will be structured. You have a few options available to you, including up as a limited company. But is this the best choice for you, and how do you go about registering as a Ltd company? We’ve put together an essential guide to help you.
What advantages does limited status offer?
A limited company is a private organisation which is a distinct and separate entity in its own right, which means that you won’t be personally liable for its losses. Limited status can be helpful in all kinds of ways, including giving you added protection in case the worst should happen. Other advantages of registering a Ltd company, according to Companies House, include:
- Tax advantages
- Exclusive rights to the company name
- Making it easier to secure investment and business loans
- Security for employees – the company will continue even if a shareholder retires or resigns
- Quick and easy decision-making (if the company directors are the main shareholders).
Additionally, it’s cheap and relatively easy to register a Ltd company, especially if you use an accountant to handle all the paperwork for you.
Is Ltd company status the right choice?
Registering as a limited company isn’t the only option available to you. Before you proceed, it’s important to investigate the other alternatives and make a careful, informed decision as to which will be the best structure for your company.
- Sole Trader – this is primarily used by freelancers and those who own and run their own businesses. It is simple to set up as a sole trader, as you just need to register as self-employed, but bear in mind that this status means that you hold sole responsibility for the business and its debts.
- Limited, Limited Liability or General Partnership – these structures are suitable for those wanting to share the legal responsibility for the business with others, with each type determining the limit to the liability that each partner will hold.
- Social Enterprise – if your business will be non-profit or you have a strong social or community mission, and most of your income comes from trading, you may be eligible to set up as a Community Interest Company (CIC).
If you expect your business will grow substantially or will be particularly at risk from debt, you may want to choose limited company over sole trader in order to protect your personal finances.
Things to know and do before setting up your company
It will make it quicker and easier if you have key decisions made, and your paperwork ready, before registering your company with Companies House. Start with choosing a company name, checking carefully on the Companies House website that the name is not already in use. There also name checker tools you can use. Companies House may also reject your chosen name if it contains what it deems to be offensive or sensitive words, a list of which is available here.
URL: https://companieshouse.blog.gov.uk/2018/02/14/secret-admirer/ (image may be subject to copyright)
You’ll need an official company address (this can be your home if you don’t have an office) and details of any directors and shareholders.
How to complete the incorporation form
Ready to register your new limited company? It’s time to tackle the incorporation form, or appoint a qualified accountant to complete it on your behalf. In fact, it can invaluable to use the services of an accountant at this stage, as they can ensure that everything is completed correctly and that there are no mistakes.
Much of the incorporation form will be straightforward, such as names, addresses and other details, but you will also need:
- Articles of Association – this is a set of ‘rules’ which will govern the running of your company, such as decision-making by shareholders and the powers of the directors. There are example Articles available to download, to help you get started.
- Memorandum of Association – this is a simple statement confirming that all subscribers agree to form a limited company, which can be created using a template for ease.
- Share structure – this will outline how the shareholdings in your company will be distributed. For example, will you own all of the shares yourself or split them 50/50 with another partner? This is another crucial thing that a professional accountant can advise you on.
- SIC Code – this is a code matched to a description of your business type (for example ‘62012 – business and domestic software development’. You’ll need to choose the closest one from the list to identify what your business does.
How much does setting up a Ltd company cost?
It is surprisingly inexpensive to register a limited company. If you complete the process online, it will only cost you £12 in total. You can only do this if you have everything ready to complete the application, your company uses standard Articles of Association and it will be limited by shares.
If you need to complete your application on paper for any reason, you will need to pay a standard fee of £40.
How to change your company status
Much of this guide is geared at brand new businesses who are registering for the very first time. However, existing business owners can also choose to change from sole trader to limited company status if they wish. This usually happens when the business grows.
The process for changing your company status is the same as above, as you’ll have to complete the incorporation form just like a new business. There are other things you’ll need to do though, such as setting up a separate bank account, transferring business assets and paying corporation tax.
A checklist for your first month as a Ltd company
A lot happens immediately after you register as a limited company, starting with receipt of documentation. Once you’ve successfully registered, you should receive your articles of incorporation, share certificates, memorandum of incorporation and certificate of incorporation.
Make sure you keep these important documents somewhere safe, as you’ll need them for the next steps. Here’s what to do during your first month as a Ltd company:
- Formally appoint your company directors
- Set up a business bank account – it is a legal requirement to have a separate bank account for a limited company, so you should aim to set this up as a matter of urgency. You may need some of the documentation sent to you by Companies House in order to do this.
- Register for Corporation Tax – this is a legal requirement within the first three months of trading, so don’t delay
- Find out about your responsibilities as a director of a limited company
- Establish strategies for running your business, including a management model and company structure all the way through accounting practices and branding
- Appoint an accountant if you don’t have one already – this not only ensures that you meet your legal and financial obligations, but it can take a huge amount of paperwork off your plate. Accountancy firms can also help with payroll, Corporation Tax and end of year filing, potentially saving you money as well as helping you to avoid penalties.
If you need help setting up a new limited company or establishing good accounting practices for a new business, get in touch with the expert team here at Accounts Department Online.
OUR NEWS & VIEWS
We have developed a tool to help you discover what government support is available for your business. This has been updated for the information released by the Chancellor on Friday 20 March 2020
As a firm of virtual bookkeepers and accountants, we along with a lot of our clients work remotely. Here are some of our top tips to make sure remote working works for you: Create a proper workspace If you are working from home, making sure everything is set up right and you have a […]
A complete guide to setting up a Ltd company One of the first big decisions to make when setting up a new business is how it will be structured. You have a few options available to you, including up as a limited company. But is this the best choice for you, and how do you […]
0113 205 4749
to speak to one of our