Key Highlights

• Determine the appropriate business structure if you are thinking through how to set up a limited company. Take time to understand the risk and opportunities in personal and limited liability formats. 
• Utilise a company name check tool to ensure your chosen business name is unique and compliant with Companies House regulations.
• Prepare the relevant incorporation documents. You can work with company formation agents to help you with this process. 

If you are a freelancer, or a small business owner, looking for a guide to setting up as a limited company, please read along.

4 Steps to Set up a Limited Company [Everything You Need to Know to Register]

If you want to register your company with Companies House online, follow these four steps below — 

1. Choose Between a Private Limited Company and Other  Registration Formats

You’ll need to select a viable business’s legal structure, and it’s not always easy. To make a good decision, understand the difference between personal and limited liability businesses. 

Personal liability businesses like Sole traders, partnerships, and limited partnership registration formats carry no legal distinction between the business owner and the business. Therefore, the owner becomes liable for financial, legal, and reputational risks. 

On the other hand, limited liability structures like Limited Liability Partnerships (LLP) and Public (PLCs) and Private Limited Companies (LTDs) limit risk exposure to the company and not the founders. 

The in-depth analysis presented in the following table examines various business structures, their associated liabilities, and how they align with different business purposes.

Compared with other business structures, a private limited company offers limited liability to its shareholders and limits the ability to distribute shares. These advantages explain why the form is among the most favourable options for entrepreneurs. 

Most freelancers, tech start-ups and retail companies opt for LTDs. For this, ensure the company has a minimum share capital of £1 with one shareholder. For a PLC, on the other hand, the minimum share capital is £50,000, with at least two directors, two shareholders and a company secretary. 

2. Choose a Company Name 

Identify three possible trading names and use a company name check tool to determine which of them is available for registration. 

Please read our company name check guide to help you understand company name rules and how to check the availability of your name. 

3. Prepare Incorporation Documents

To register a company, you’ll need to prepare and submit the following documents —

• A Memorandum of Association – A legal document that founders (subscribers) sign to express their agreement to form the company. 
• Form 10 – Proposed company name, office address, director’s and secretary’s names, addresses and the number of shares the subscribers take. 
• Form 12 – A legal declaration that the limited company complies with all the legal requirements for incorporation outlined in the Companies Act.
• Articles of Association – It outlines the rules and regulations governing the operation and management of a company. 

4. Appointment of Company Officials 

The appointment of a company director, secretary, and accountant is crucial and sets the foundation for success. These key actions are pivotal in establishing a well-structured and compliant organisation.

By carefully selecting competent individuals for these positions, a company can ensure effective governance, regulatory compliance, and sound financial management.

Appoint Your Company Directors 

According to the UK government, a limited company must have at least one director. The director manages the company’s day-to-day operations and makes critical decisions. When appointing your director(s), ensure they can fulfil their duties efficiently.

Director eligibility criteria

Before appointing a director, confirm they meet the following criteria:

1. Must be at least 16 years old.
2. Not be disqualified from being a company director.
3. If undischarged bankrupt, they must have express court permission to be a director.

How to find the right director

To identify the right director, make sure the scope of their skills and experience aligns with your company’s needs, industry, and goals. A director should have demonstrable industry knowledge, leadership ability, and strategic thinking skills.

Director responsibilities. 

You need to meet the following director responsibilities to be eligible. Some of these responsibilities include — 

1. Adhere to the articles of associations;
2. Act within their powers as directors;
3. Identify and manage risks that could affect the company;
4. Directors determine the strategic objectives and policies for the company’s success;
5. Oversee the company’s activities and operations, ensuring they align with set goals;
6. Running a limited company in accordance with the law and relevant regulations; 
7. Oversee the company’s financial performance and ensure financial solvency;
8. Communicate with shareholders and may be involved in negotiations or discussions with external partners or investors;
9. Inform shareholders when there is a potential conflict of interest in their dealings as directors; and 
10. Pay corporation tax.

In the absence of a secretary, additional responsibilities may include — 

1. Maintain company records, noting you’ll need to provide Companies House with information on any significant changes, such as changes in ownership structure;
2. File confirmation statements, company tax returns, and any other statutory documents you need to provide to HMRC and Companies House;

Identify a Company Secretary 

The appointment of a company secretary is optional. If you decide to have one for your business, they will take up some of the director’s responsibilities. 

Eligibility criteria.

A secretary must fulfil the following criteria —

1. Can be a director but not the company’s auditor;
2. If an undischarged bankrupt, they must have express court permission to be a secretary.

Responsibilities of a company secretary. 

The secretary’s duties may vary depending on the company’s Articles of Association, but typical responsibilities of a corporate secretary in a limited company include —

1. Once you’ve registered your company, the secretary serves as the custodian of the companies incorporation documents, register of company officers, company number, and date of formation, including any other details about its registration;
2. Act as the custodian of company records, including the minute book and registers of members and directors;
3. File annual accounts and confirmation statements to Companies House;
4. Manage the company’s finances, including preparing and filing accounts, handling payroll, and paying dividends to shareholders; 
5. Regularly provide detailed reports to directors and shareholders regarding the company’s compliance with legal and regulatory requirements, ensuring transparency and accountability.
6. Act as a point of contact between the company and third parties such as shareholders and regulatory bodies; and
7. Ensure that directors and other stakeholders effectively implement the company’s governance framework.

Company Accountant.

A company accountant is not a legal requirement. However, hiring one after you’ve set up your limited company will help you ensure your operations are tax efficient. 

Accountant responsibilities 

The primary responsibility of a company accountant is to work with the directors and corporate secretary to manage the company’s financial health. Company accountant responsibilities may include the following —

1. Keep accurate and up-to-date financial records, including ledgers, journals, and subsidiary books.
2. Prepare financial statements per accounting standards and regulations, such as income statements, balance sheets, and cash flow statements.
3. Assist in developing budgets, turnover reports, and financial forecasts, monitoring actual performance against budgeted figures, and providing analysis of variances.
4. Manage the accounts payable process, including recording and paying vendor invoices. Handling accounts receivable, including issuing customer invoices, recording receipts, and following up on overdue payments.
5. Manage the company’s cash flow, including monitoring business bank accounts, reconciling bank statements, and ensuring proper recording of cash transactions.
6. Register for corporation tax and ensure compliance with tax laws and regulations by paying income tax, filing tax returns, calculating tax liabilities, and keeping track of tax deadlines.
7. Conduct financial analysis to assess the company’s financial performance, profitability, and efficiency to provide insights and recommendations.
8. Establish and maintain internal controls to safeguard company assets, prevent fraud, and ensure the accuracy and reliability of financial information.
9. Stay up-to-date with accounting standards, regulations, and changes in tax laws. 
10. Ensure compliance with financial reporting requirements and disclosure obligations.

Shareholders.

Shareholders are individuals, entities, or institutions that own a company stake that is proportion to the number of shares they hold compared to the total number of outstanding shares. 

Companies in England and Wales will issue three different classes of shares – ordinary, redeemable, and preference shares. 

• A private limited company must have a minimum of one shareholder.
• Ordinary or common shares are the standard types of shares. Shareholders holding ordinary shares have voting rights in the company, which means they can participate in decision-making processes such as electing directors or approving significant corporate actions. Unlike fixed or guaranteed dividends under preferred shares, payment of dividends on ordinary shares is variable and depends on the financial performance or the board of director’s discretion. Ordinary shareholders participate in the company’s profits. They are entitled to a share of any distributed dividends, though they are last in line regarding receiving dividends or recovering their investment in the event of the company’s liquidation.
• Redeemable shares are a type of share that can be repurchased or redeemed by the company at a specified future date or at the discretion of the company. Companies issue these shares with predetermined terms and conditions regarding their redemption. Redeemable shares provide more flexibility, as a company can repurchase them, allowing the business to reduce its share capital or adjust its ownership structure. Redeemable shares may or may not carry voting rights depending on the agreed-upon terms. Dividend payments on redeemable shares can vary, similar to ordinary shares, regarding their participation in profits and priority in dividends.
• As the name suggests, preference shares have specific preferences or advantages over ordinary shares. They typically carry a fixed dividend rate or a predetermined formula for calculating dividends. These shares give shareholders a priority claim on the company’s profits, meaning they receive their dividends before ordinary shareholders. Preference shareholders are entitled to a fixed dividend payment, often at a specified rate, before the company distributes dividends to ordinary shareholders. However, preference shareholders may or may not have voting rights. Such shares are generally considered lower-risk investments than ordinary shares because of the fixed dividend payment, but they may not offer the same potential for higher returns.

Convertible shares have the unique feature of being convertible into another class of shares, typically ordinary, at a predetermined conversion ratio and at a specified time or under certain conditions. The conversion option provides flexibility to shareholders, allowing them to benefit from the potential increase in value or future company growth. Convertible shares are often issued to investors or lenders to enable them to convert their investments into ordinary shares upon the realisation of a pre-determined criterion. Such shares carry the characteristics of the original class of shares (e.g., preference or redeemable) and the potential for conversion into another category of shares.

People With Significant Control (PSC)

Also called beneficial owners, a person with significant control is the person or persons who control the company. 

Eligibility criteria 

PSCs hold —

• Over 25% of shares;
• Above 25% of voting rights;
• The right to appoint or remove the majority of the board of directors

As you register your business with Companies House, you’ll need to provide details about persons with significant control.

The PCS details to submit —

• Name;
• Date of birth;
• Nationality and country of residence;
• Correspondence address;
• Date they became a PSC of the company;
• Date you entered them into your PSC register;
• Nature of control which apply;

You must include the level of their shares and voting rights. Companies House does not require personal details such as home addresses or national insurance numbers. 

Choose a Sic Code

When setting up a company in the UK, you must select an appropriate Standard Industrial Classification (SIC) code that best represents the primary business activities of your company. The SIC code helps classify your company’s industry sector.

To identify the most relevant code for your business, refer to the Nature of Business: Standard Industrial Classification (SIC) codes – a Companies House resource. 

You can search for SIC codes based on keywords related to your industry or browse the available categories and subcategories to find the closest match to your business activities. 

Once you have identified the appropriate code, include it in your company’s registration forms and other official documents.

Frequently Asked Questions

1. What is a limited company?

A limited company is a type of business structure where the company has a legal identity separate from its owners (shareholders) and its managers (directors). The liability of the company’s shareholders is limited to their investment in the company, meaning they are not personally liable for the company’s debts or liabilities beyond the amount they have invested.

Limited companies can be private limited companies (Ltd) or public limited companies (PLC). LTDs are generally smaller, with shares owned by a closed group, and their shares are not available for public trading. On the other hand, PLCS can offer shares to the public and have their shares traded on a stock exchange.

2. How much does it cost to set up your limited company with Companies House Online?

While using Your Company Formations, it will cost you  £12.48. Launch your business confidently by working with a company formation agent. 

3. Do I need a director and a company secretary?

No. The law requires you to have at least one director, but a corporate secretary is optional. 

4. Can I have my limited company registered within 24 hours?

Yes. Visit our website at (yourcompanyformations.co.uk) or call us t 02076897888. Review this company formation UK checklist and ensure you have everything you need. If you have any questions, contact us, and a formations expert will answer all your questions. 

Related: Your Ultimate Guide to Starting a Business in the UK