Are you currently planning to set up a limited business? By setting up a limited company you will have more power over your brand and how you want it to be presented. You will be responsible for everything, which can be a lot of information to get your head around. We decided to create this ultimate guide to help you follow the steps on how to set up and create a limited company.
The basics
Many brands set up a limited company so they can control what their brand represents. As a limited company, you will determine everything that you do, what direction your brand goes in, what the brand represents and also will control the brand’s finances. There will be a lot more work but if you want to have an integral role in the future of your brand then it’s a good route to take.
Why set up a limited company?
The main attraction for setting up a limited company is that you will become your own legal entity and your company finances will be completely separate from your personal finances. Although becoming a limited company isn’t straight forward and will involve some work, it will give you financial benefits and protections. This is why so many companies decide to become a limited company.
It doesn’t just have to be you who will be in your limited company, you can also have shareholders. The company ownership will then be divided into equal shares, however, then they will have a say in the business. If you want to go it alone you can create a limited company with yourself as the only shareholder, but that means all the pressure is on you.
What are the benefits?
Some of the benefits include:
- Your personal finances are protected if there is any debt or legal action against the company.
- Easier for staff, you can pay salaries via the Pay As You Earn (PAYE) scheme.
- You’ll pay less corporation tax.
- You are your own legal entity, which makes it easier to sell the business.
- Limited companies are often seen as a more professional company, this means investors will be more likely to be interested in investing.
What are the legal requirements for limited companies?
Of course, there are legal requirements you must adhere to when you set up a limited company. You must have at least one director to run the business and these company directors have a lot of work to do.
They will be responsible for filing your annual return, submitting corporation tax to HMRC, make sure employees are paying income tax and registering the company for VAT if you make more than £85,000.
How do I set up a limited company?
Step 1 – Choose a business name
This is the fun part, it’s time to pick a name for your business! You cannot choose a name another company already has, so make sure to do a quick Google search to rule this out. Also, check the Companies House register which has a list of all limited companies.
The new name must have Ltd or limited at the end and cannot use words Bank, Royal, British, Chartered, English, Scottish or Commission. You also can’t choose a name that implies you have qualifications that you simply do not.
Step 2 – Choose Company Officers
Every company needs at least one company officer who is responsible for the business. If you are a private limited company you will also need one company director. Public limited companies that trade shares publically need at least two directors and a company secretary.
Step 3 – Choose how to register a limited company
You register your company with Companies House, they will request three documents which we have detailed below. If you’re not really familiar with this process then you can get an agent to do this for you, however, they will charge a fee.
What documents will I need?
There are three documents that you have to submit to Companies House to trade, they are outlined below.
- A Memorandum of Association
This is a legal statement signed by everyone who makes up the company including the names and addresses of directors and shareholders. - The Articles of Association
A legal document that states the rights and the powers of company directors and shareholders over the business. - Form IN01
This document lists the details of the company directors, company secretary if you have one, shareholders and details the share capital. You can download this from Companies House.
How to choose your registered office address
Every business needs an address, so you need to include one for your business. Make sure that you choose this address carefully as it is where all your business correspondence will be delivered and will also be publicly accessible on the Company’s House register. Remember that your address has to be in the UK, you can use your house address, however as this is made public, are you sure that you want this information available publicly? The most popular choice for limited companies is to use a service that provides a registered office address, this means that they can have an alternative office address and is the most popular option. This service costs around £50 a year, so is a good investment idea.
What are the steps after you have registered a limited company?
So, you’ve registered your company and followed all the necessary steps. Now you need to confirm that your company actually exists! After registering you will get a Certificate of Incorporation, this is to confirm your company is legit and exists! It will include your company number and the date that you registered.
You’re nearly finished, the final step after this is to register your company with HM Revenue & Customs (HMRC). Remember that you have to do this within the first three months of trading, if you don’t, you’ll be hit with a fine, which is something you definitely don’t want to be lumbered within your first few months of trading.
Written by Stuart Cooke of Evalian.co.uk, data protection and cyber-security consultants for businesses big and small.
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