11 Mistakes to Avoid When Registering a Company in the UK

Starting a company in the UK is exciting, but it's easy to get it wrong.

New business owners often initiate the company formation process without a thorough understanding of the requirements, legal obligations, or structural implications.

From choosing the wrong type of company to overlooking company name requirements, many common mistakes in company registration can delay your setup, expose your finances, or lead to compliance issues down the line.

And if you're registering a limited company online without the right support, these mistakes only become more likely.

What mistakes do most people make when forming a limited company in the UK?

Forming a limited company in the UK means making wise decisions from the start, not just filling in forms or choosing a name that sounds good.

Whether you're a first-time founder or transitioning from a sole trader to a limited status, it's essential to establish a solid foundation. Key choices regarding company structure, registered office, tax setup, and legal filings all impact how your business operates and grows.

By taking the time to plan correctly, you can avoid delays, stay compliant, and build your company on a solid foundation.

1. Choosing the wrong business structure (LTD, LLP, Guarantee)

Getting your company structure wrong is one of the most costly mistakes you can make when starting a business in the UK. It affects everything from how you're taxed to how you pay yourself

Many new business owners default to forming a private limited company (LTD) without asking the key question: “What structure actually fits my business model and goals?”

Here’s a quick guide to help you choose the right setup:

• Private Limited Company (LTD) – Best if you want limited liability protection and plan to bring in shareholders or distribute profits.
• Company Limited by Guarantee – Suitable for businesses with social or community-focused goals, where profits are reinvested to fulfil those aims. This structure also works well if you plan to register as a charity with the Charity Commission in the future.
• Limited Liability Partnership (LLP) – Ideal for professionals who want to work with partners and share profits, such as consultants, accountants, or legal advisors.

If your structure doesn’t match your business needs, you risk higher taxes, more admin, and potentially having to dissolve and start over.

2. Picking a company name that’s restricted or already taken

Your company name isn’t just a label; it’s a legal identity.

One of the most common reasons applications get rejected or delayed is that the name is either already in use, too similar to another, or includes restricted terms that trigger regulatory review.

Before you register, run two quick checks:

• Use our Company name check tool to confirm the name isn’t taken
• Search the UK IPO trademark register to avoid infringing on someone else’s brand

Getting this wrong can delay the registration process, impact your business bank account setup, and even expose you to legal disputes.

3. Not providing the right documents for sensitive words

If your company name includes a word like “Group,” “Association,” or “Charity,” you’ll need formal justification and often written approval from a government body.

This is where many new founders trip up: they assume the name is fine, but Companies House rejects the application because it is missing supporting evidence.

Examples of sensitive terms:

• “Accredited” (needs professional body confirmation)
• “Institute” (must prove educational or research role)
• “Royal” (requires express permission from the Cabinet Office)

Take a look at this list of sensitive words and phrases.

If you’re unsure, speak with one of our formation agents before you submit. Delays here can disrupt the entire company formation process, especially if your business plan is time-sensitive.

4. Issuing only one share per shareholder

It might seem simple to issue one share per shareholder, especially when you’re setting up a limited company with a co-founder or partner. However, this common business mistake can cause serious complications later.

When all shareholders hold a single equal share, decision-making and profit distribution are locked in at a 50/50 split. That sounds fair until one of you wants to invest more capital, bring on another partner, or exit the business.

Allocating shares in proportion to contribution, risk, or long-term strategy is a more flexible approach. Although the articles of association can always be updated, it’s better to align the share structure with your company’s future from day one.

5. Misunderstanding the difference between the registered office and the service address

Many business owners don’t realise that the UK requires different addresses for different legal purposes. Using the wrong one in the wrong place can delay registration or expose private information unnecessarily.

Here’s the difference:

To stay compliant and protect your privacy, ensure your registered office is in the correct UK jurisdiction (e.g., England and Wales) and consider using a formation agent’s address as your director’s service address if privacy is a concern.

6. Exposing director home addresses unnecessarily

Your residential address is part of your Companies House submission, but that doesn’t mean it should be public. One of the most common mistakes first-time directors make is listing their home address as their service address, not realising it will appear on the public register.

To avoid this, use a registered office or formation agent’s address as your public-facing service address. It’s a simple fix that protects your personal privacy for the long haul.

8. Not planning how to pay yourself as a company director

You’ve registered your company, but how will you actually pay yourself?

This is one of the most misunderstood areas for new directors and one of the most common mistakes to avoid when forming a company.

Getting paid through your limited company isn’t as simple as withdrawing money. Without a clear plan, you risk breaking company law, overpaying taxes, or losing track of your business finances.

There are typically three ways directors take income:

• A monthly salary (via PAYE)
• Dividends, if the company is profitable
• Reimbursement for business-related expenses

Setting up this structure early helps streamline payroll, manage cash flow, and ensure you stay compliant with HMRC from day one.

9. Using “free” company formation services that restrict your options

Free isn’t always free, and that’s especially true when forming a company in the UK.

Many “free” formation services offered by banks or financial apps only allow minimal setup: one shareholder, one director, and little to no customisation. That might work for the simplest of startups, but if your business needs evolve, you're locked into a rigid framework.

With Your Company Formations, you pay a modest registration fee but gain full control over your company’s structure, access to expert support, and eligibility for cashback offers from partner banks. The initial fee is often recovered completely through these cashback programs.

If you’re serious about running the company long-term, the right setup isn’t just worth it; it pays for itself.

10. Not putting your company on dormant status if not ready to trade

If you're not ready to start trading immediately after registration, you can't simply leave your company inactive and ignore it. Failing to declare it as dormant is one of the most costly administrative mistakes in the UK.

A dormant company is one that’s registered with Companies House but not yet trading or receiving income. However, unless you officially notify HMRC and Companies House, your business will still be treated as active. That means you’ll be expected to file full accounts, submit Corporation Tax returns, and possibly even pay tax despite having no income.

To avoid this, you’ll need to let HMRC know your company is not trading, submit dormant accounts each year to Companies House, and keep minimal but accurate records.

11. Missing annual confirmation statements, even for non-trading companies

A confirmation statement isn’t just a box-ticking exercise; it’s a legal requirement.

Even if your company is dormant, you’re still required to file a confirmation statement at least once every 12 months.

This simple document confirms your company's basic details: registered office, directors, shareholding structure, and business activity codes (SIC). However, many business owners assume it’s optional if they’re not trading, and that assumption can lead to serious consequences.

What happens if you miss it?

• Your company can be struck off the register by Companies House
• You may face late filing penalties and investigation
• It can disrupt future plans to reopen or scale your business

Think of the confirmation statement as your company’s “annual check-in.” It maintains your legal standing and keeps your data up to date, whether you’re actively running the company or simply holding it in reserve for future growth.