Setting up a limited company in the UK is relatively straightforward, but there are several decisions you'll need to make before you register, from choosing your company structure and shareholders to deciding how your shares will work.
There are also important tax, accounting and legal responsibilities to deal with once your company has been formed.
In this guide, we'll take you through how to set up a limited company step by step, what you'll need to register with Companies House and what to do once your company is ready to trade.
Step 1: Decide What Type of Limited Company You're Setting Up
Before you register, you'll need to decide what type of limited company you're setting up. In the UK, a private limited company will usually be limited by shares or limited by guarantee.
Limited by Shares
A company limited by shares has shareholders who own the company. Each shareholder's financial liability is normally limited to the amount they have agreed to pay for their shares.
This is the structure most commonly used by businesses that intend to make a profit, with profits potentially distributed to shareholders as dividends.
Limited by Guarantee
A company limited by guarantee doesn't have shareholders or issue shares. Instead, it has guarantors who agree to contribute a set amount towards the company's debts if it is wound up.
This structure is commonly used by non-profit organisations, clubs, societies and community organisations, where profits are generally reinvested rather than distributed to members.
Most businesses: If you're setting up a business to make a profit, you'll usually be looking at a private company limited by shares. The remaining steps in this guide primarily focus on this type of company.
Step 2: Choose and Check Your Company Name
You'll need to choose a unique name for your limited company and check that it meets Companies House rules.
Your company name:
- can't be the same as another registered company name
- can't be offensive
- must usually end in ‘Limited’ or ‘Ltd’
- may need approval if it contains certain sensitive words or expressions
Companies House also has ‘same as’ rules, which means small changes such as punctuation or certain similar words may not be enough to distinguish your name from one that's already registered.
You can check whether your proposed name is available using the Companies House name availability checker.
Step 3: Choose Your Registered Office and Email Address
You need to give Companies House a registered office address and registered email address when setting up your company.
Your registered office must be a physical, appropriate address in the same part of the UK where your company is registered. This is where official correspondence will be sent, and the address will appear publicly on the Companies House register.
If you run your business from home but don't want your home address to be public, you can use another suitable address, such as your accountant's address or a registered office service, with their permission.
You'll also need an email address that Companies House can use to contact the company. Unlike your registered office, this email address isn't published on the public register
Step 4: Appoint Your Company Director(s)
Every private limited company needs at least one director, who must be aged 16 or over. A director can also be a shareholder, but they don't have to own any of the company.
Directors are legally responsible for running the company and making sure its obligations are met. This includes keeping appropriate company records, filing accounts and other required information, and making sure the company's tax responsibilities are dealt with. You can use an accountant to handle many of these tasks, but the directors remain legally responsible for the company.
If you're setting up on your own, you can be the company's only director and shareholder.
Step 5: Decide Who Will Own the Company
If you're setting up a company limited by shares, you'll need at least one shareholder. Shareholders own the company through the shares they hold and may have rights to vote on company decisions and receive dividends.
How Many Shares Should You Issue?
There's no single share structure that's right for every company. A straightforward company with one owner could be formed with just one ordinary share, giving that shareholder 100% ownership.
If there will be several owners, however, the number and type of shares you issue can affect ownership, voting rights and how profits are distributed. It's therefore worth considering how you want the company to be owned before you register it.
Step 6: Identify People With Significant Control
You'll also need to identify your company's people with significant control (PSCs) and provide their details to Companies House.
A PSC is someone who owns or controls the company. In a straightforward company, this will usually include anyone who has more than 25% of the shares or voting rights. Other forms of control can also make somebody a PSC, such as having the right to appoint or remove the majority of directors.
For example, if you're the sole shareholder and director, you'll normally also be the company's PSC.
You'll need to provide PSC information when setting up the company and keep Companies House updated if it changes. More complicated ownership structures can have additional rules, so it's worth checking the full Companies House PSC guidance if you're unsure.
Step 7: Choose Your SIC Code
You'll need to choose a Standard Industrial Classification (SIC) code when registering your company. This tells Companies House what type of business activity your company carries out. Companies House
You can search the Companies House SIC code list to find the code that best describes what your business does. If your company carries out several different activities, you can provide more than one SIC code.
Step 8: Prepare Your Memorandum and Articles of Association
Every limited company needs a memorandum of association and articles of association. Despite the formal names, these are simply documents confirming the formation of the company and setting out how it will be run.
Memorandum of Association
The memorandum confirms that the company's original shareholders or guarantors agree to form the company. If you register online through Companies House, this is created automatically as part of the application, so you won't normally need to prepare one yourself.
Articles of Association
The articles are the company's internal rules, covering how decisions are made and how the company is run.
Most straightforward companies can use the standard model articles. You can instead use amended or bespoke articles if your company needs different arrangements, although this is an area where professional advice may be useful if your ownership or management structure is more complicated.
Step 9: Verify Your Identity With Companies House
Identity verification is now a legal requirement for people setting up, running, owning or controlling a UK company. For a new limited company, each director will need to verify their identity before the company can be registered. People with significant control (PSCs) also need to verify their identity.
You can verify your identity:
- online using GOV.UK One Login, which is free
- through an Authorised Corporate Service Provider (ACSP), such as an accountant or solicitor registered as an authorised agent with Companies House
Once you've successfully verified your identity, you'll receive an 11-character Companies House personal code. This code belongs to you rather than the company and, if you're setting up a new company, you'll need to provide the personal code for each director as part of the registration.
Keep your personal code safe
You'll use the same Companies House personal code for other company roles you hold, so you don't need a new one for every company. You can share it with a trusted accountant or agent if they need to make filings on your behalf.
Step 10: Register Your Limited Company With Companies House
Once you've made the decisions above and have everything ready, you can register your limited company with Companies House. You can complete the registration yourself online or ask an accountant or formation agent to do it for you.
What Happens After Your Limited Company Is Registered?
Once Companies House approves your application, you'll receive a certificate of incorporation confirming that your company legally exists. This includes your company registration number and date of incorporation.
HMRC will also issue your company with a separate 10-digit Unique Taxpayer Reference (UTR), which you'll need when dealing with Corporation Tax.
Before you start trading, there are a few other things to get in place.
Open a Business Bank Account
A limited company is legally separate from its owners, so its finances need to be kept separate too. Opening a business bank account in the company's name is the simplest way to keep company income and spending separate from your personal finances.
This will also make bookkeeping, paying expenses and preparing your accounts much easier.
Set Up Your Accounting and Record-Keeping
From the beginning, your company needs to keep accurate records of money coming in and going out, assets, debts and other financial transactions. You'll also need to retain supporting documents such as invoices, receipts and bank statements.
Setting up accounting software and a clear bookkeeping process early can make this much easier. You may also choose to work with an accountant who can manage your bookkeeping, accounts and tax obligations as the company grows.
Set Up Corporation Tax
If you register your company using the Companies House online service, you'll usually be set up for Corporation Tax at the same time, unless your company is dormant.
Once you receive your company UTR, you'll need to make sure Corporation Tax services are added to your business tax account. If your company doesn't start trading immediately, it can remain dormant for Corporation Tax until it begins doing business.
Register for PAYE If Necessary
If the company will employ staff or pay you a salary as a director, you may need to register as an employer and operate PAYE.
You can register for PAYE as part of the Companies House online registration process, or arrange it separately with HMRC.
Check Whether You Need to Register for VAT
Your new company may also need to register for VAT depending on its taxable turnover and circumstances. Businesses can also choose to register voluntarily where appropriate.
You can find out more about registration and managing VAT in our VAT guide.
Check for Any Other Registrations, Licences or Insurance
Depending on what your business does, setting up the company may not be the only registration you need before you begin trading.
For example, you may need industry-specific licences or permissions, business insurance or additional registrations if you're employing people.
Your Ongoing Responsibilities as a Limited Company
Setting up your company is only the beginning. Once it's trading, there are ongoing accounting, tax and Companies House requirements you'll need to keep on top of.
You can use an accountant to manage many of these responsibilities, but company directors remain legally responsible for making sure the company's records, accounts and filings are properly maintained and submitted.
Can You Set Up a Limited Company Yourself?
Yes. You can register a limited company yourself through Companies House, and if you're setting up a straightforward company with one owner and ordinary shares, you may feel comfortable handling the process yourself.
However, registration becomes more complicated when there are decisions to make. Professional help from experts such as Ryans can help you decide how your company should be structured, complete the formation and get the accounting and tax side set up correctly from the beginning.
How Much Does It Cost to Set Up a Limited Company?
It currently costs £100 to register a limited company online with Companies House. If you use an accountant or company formation agent to register the company for you, there will usually be an additional professional fee depending on the support you need.
How Long Does It Take to Set Up a Limited Company?
Companies House says that online applications are usually registered within 24 hours. Applications can take longer if Companies House needs to carry out additional checks.
The actual incorporation may therefore be quick, but it's worth allowing enough time beforehand to make decisions about your shareholders, shares, directors and company structure, particularly if you're setting up the business with other people.
Setting Up a Limited Company: Final Checklist
If you're ready to set up your limited company, use this checklist to make sure you've covered the main steps before and after registration.
Ready to Set Up Your Limited Company?
Whether you're starting a new business or moving from sole trader to limited company, our team can guide you through the process and make sure you understand your responsibilities going forward.
Get in touch with Ryans if you'd like help setting up your limited company.
FAQ's
Can I Set Up a UK Limited Company If I Don't Live in the UK?
Yes. Company directors don't have to live in the UK, although the company itself must have a registered office address in the part of the UK where it's incorporated.
There may be additional tax and practical considerations if you're running a UK company from overseas, so it's worth getting advice based on your circumstances.
Can I Set Up a Limited Company Without Trading Straight Away?
Yes. You can register your company without starting to trade immediately. A new company that hasn't started trading will usually be considered dormant for Corporation Tax.
You'll still have certain Companies House responsibilities while the company is dormant, including filing annual accounts and a confirmation statement.
Can I Have More Than One Limited Company?
Yes. There's no general rule preventing you from being a director or shareholder of more than one limited company.
Each company is a separate legal entity, however, so each will have its own records, accounts, Companies House filings and tax responsibilities. I'd keep this answer at that, rather than wandering into group structures or associated-company Corporation Tax rules.