How to set up a limited company in UK legally and conveniently?

The UK is one of the most perfect economic hubs for startups because this country is famous for its entrepreneurial culture, the availability and quality of funding venture capital. 

Setting up a limited company in UK helps you to define your brand and manage your business in the most tax-efficient method.

If you’re not sure what entails to set up a limited company in UK, here is a guide for you. 

What is a limited company?

A limited company is considered as a type of legal structure. Basically, a limited company:

• owns a legal identity which is separate to that of shareholders and directors.
• can take more risks than that of a sole trader, who is personally liable for business debts when something wrong happens.
• Setting up a limited company can be related to some added paperwork and responsibilities, making them take time to run.

How to set up a limited company in the UK legally and conveniently?

A limited company ensures limited liability. The company is an independent legal entity, so as a company director, you can’t lose the face value of your share in your business. 

This overcomes the disadvantage of becoming a sole trader, which is that your personal funds aren’t totally separated from your business ones. 

This means that if your sole trader business gets in trouble or is sued, your personal assets can take risk. With a limited company, your personal assets are assured.

Another advantage of setting up a limited company is that companies pay low tax on their profits.

In addition, there are other benefits of being a limited company if compared to a sole trader:

• Separate legal identity: this means the company will be liable if something goes wrong, it’s not a personal matter. You’ll just lose what you invest in the business.

• More professional: some businesses can be more professional in their industry when they operate as a limited company which can make it easier to secure investment or sell the business.

• Tax-efficient: you can pay tax via your business and pay yourself in salary and dividends. Depending on your profits gained, this can be more tax-efficient than setting up as a sole trader.

How to set up a limited company in UK?

Good news is that it won’t take a lot of time to register your company with Companies House. If everything is well-prepared, you can proceed in a few minutes and you’re usually registered within 24 hours. Postal applications can take 8-10 days.

However, it can take some time to fill in the required paperwork. 

This step-by-step guide will tell you how to set up a limited company in UK. Follow these steps when establishing a limited company.

1. Choose the type of limited company

Once you’ve intended to set up a limited company, you have to pick which type you want to build. The two main options are:

LTDs: Private Limited Companies

PLCs: Public Limited Companies

Private Limited Companies are mainly selected by most freelancers, start-ups, contractors or small businesses because PLCs need a share capital of £50,000 minimum with at least 2 shareholders, 2 directors and a qualified secretary.

For LTDs, there’s no required share capital requirement. You can set up a LTD with a share of £1.

2. Choose your company name

Like a website or address, your company needs a unique name. You can differentiate in a few ways to make sure your company name is unique. For example, a limited company name can use“Limited” or “Ltd.” (“ABC Limited” or “ABC Ltd.”). 

There are over 1,500 companies set up every day, so check your name carefully to register.

3. Form a limited company

You need to give some required personal details to help Companies House identify you as a company director. 

You need to allow them to know what kind of business your limited company will carry out by submitting Standard Industrial Classification (SIC) code for your business. 

You can choose the most appropriate code from the Condensed SIC code list online maintained by Companies House.

Choose the addresses you need to register for your business. You’ll need to choose your Registered Office Address, and provide a service address. 

The cost of setting up a limited company in the UK is quite cheap. The fee can be £13 for filing online or £40 through the post. Besides, some other costs will be added depending on your business type. It can be accountants’ fees, insurance, wages or rent. 

Decide on the ownership of your company and the number of shareholders and how many shares they will have.

Once you’ve finished it all, you’re good to go. Companies House will often have your limited company formed in a few hours.

4. Complete the incorporation process

Companies House is in charge of all limited company registrations in the UK. Their website gives specific information on how to proceed. You just need to follow the instructions to get everything done.

The documents must be completed and handed to Companies House to complete the incorporation process. Often, a company formation agent or accountant will complete these on your behalf:

Memorandum of Association: limited company name, location, business kind

Form 10: director names, addresses and registered limited company address

Form 12: state the limited company in accordance with the terms of the Companies Act

Articles of Association: outline the director powers, shareholder rights etc....

You’ll also need some small business insurance to cover you and your business for any work you’re doing.

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