How to Set-up a Limited Company
This article will guide you through the process of starting a Limited Company (Ltd Co). We assume that you ar enew to the world of Limited Companys, so we make no apologies for going right back to the basics.
Setting up limted company is a very straight forward process. It costs from from as little as £17. If you get your Accountant to do it for you, the cost is likely to be 10 times more.
This article will guide you through the process of starting a Limited Company (Ltd Co). We assume that you ar enew to the world of Limited Companys, so we make no apologies for going right back to the basics.
Setting up limted company is a very straight forward process. It costs from from as little as £17. If you get your Accountant to do it for you, the cost is likely to be 10 times more.
I find that using the link below is the easiest, and cheapest method to start a Limited Company.
A little bit about Companies House
The process of setting up a Company involves registering the Company at Companies House http://www.companieshouse.gov.uk/. This is the official government agency that deals with the administration of Companies and their Directors. You should be aware that there are various forms that need to be filed with them each year, with VERY strict deadlines. The cosequences of late filing are very severe, and can include large fines of upto £1,500 for some repeat offenders! Find out more on my Filing Deadlines and Penalties page.
Directors and Shareholders
When you set up a company, you will have to nominate someone (usually yourself) to become a Director. This is an official legal title, with certain legal obligations. You can have as many directors as you like, but only have as many as you really need.
It is important to understand that Directors are very distinct to Shareholders. Although in many cases you will be the sole Director and Shareholder, do please be aware that the two are very seperate.
As a Director you will need to complete a Tax Return each year. You will probably need to hire an accountant to complete this for you. Here is my guide to Choosing an Accountant.
Finally, don't forget to inform HM Revenue and Customs that you have started a Company, and that you are a Director.
Choosing your Limited Company Name and Address
Each Limited Company name must be unique. You can check if your favourite name is already taken by using my special tool below.
The adress is know as the registered office, and is the location where your official documents will be sent to. It must appear on all of your stationary, website and any correspondence that you send from the Limited Company. Your accountant would be happy for you to use their adress for this - for a fee of between £50 and £100 per year.
The process of setting up a Company involves registering the Company at Companies House http://www.companieshouse.gov.uk/. This is the official government agency that deals with the administration of Companies and their Directors. You should be aware that there are various forms that need to be filed with them each year, with VERY strict deadlines. The cosequences of late filing are very severe, and can include large fines of upto £1,500 for some repeat offenders! Find out more on my Filing Deadlines and Penalties page.
Directors and Shareholders
When you set up a company, you will have to nominate someone (usually yourself) to become a Director. This is an official legal title, with certain legal obligations. You can have as many directors as you like, but only have as many as you really need.
It is important to understand that Directors are very distinct to Shareholders. Although in many cases you will be the sole Director and Shareholder, do please be aware that the two are very seperate.
As a Director you will need to complete a Tax Return each year. You will probably need to hire an accountant to complete this for you. Here is my guide to Choosing an Accountant.
Finally, don't forget to inform HM Revenue and Customs that you have started a Company, and that you are a Director.
Choosing your Limited Company Name and Address
Each Limited Company name must be unique. You can check if your favourite name is already taken by using my special tool below.
The adress is know as the registered office, and is the location where your official documents will be sent to. It must appear on all of your stationary, website and any correspondence that you send from the Limited Company. Your accountant would be happy for you to use their adress for this - for a fee of between £50 and £100 per year.
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Shares - Authorised and Issued
You will need to decide on how many shares you will allow the Company to have. I always suggest having 1,000 £1 Ordinary shares as the Authorised Share Capital. Then you allocate the shares to the Shareholders on your agreed basis.
The "Authorised Share Capital" is the maximum amount of shares that the Company can "Issue" to its Shareholders. This is typically 1,000 £1 Ordinary shares. If you are the only shareholder, there is really no need to issue more than 2 of the £1 Ordinary Shares to yourself. However many you issue to yourself, or other shareholders, money will have to be paid into the Company bank account. So if you issue 2 x £1 shares, simply pay £2 in to the Company bank account.
TOP TIP: If you have two directors setting up as shareholders on an equal 50/50 basis, perhaps consider having a 3rd shareholder with a 2% shareholding, to act as a casting vote should the shareolders not agree on a decision or strategy. Of course this person would need to be impartial. This would result in a 49 -2 - 49 split. I have seen first hand what can happen when Director / Shareholder's can't agree on the best course of action, and it can be very destructive.
The following documents have to be completed and returned to Companies House:
1) Memorandum of Association - this includes the names and addresses of the subscribers who are forming the limited company.
2) Articles of Association - outlines the directors' powers, and any shareholders' rights, etc.
3) Form IN01 - contains details of the director(s), company secretary (if required), details of any shareholders, and details of the share capital (if it is a company limited by shares).
The Companies House website provides detailed guidance and FAQ's which describe all aspects and requirements of the registration process, including the limitations imposed on company names, and the payment required to complete the registration process.
