Everything You Must Know To Set up a Limited Company UK

Everything You Must Know To Set

For an entrepreneur, setting up a business is always a dream goal and an empowering decision. However, after making the decision, the next question is: Which type of company should I set up?

Well, there exist three types of business structures; sole proprietorship, partnership, and limited company. In the United Kingdom, a limited company is the most common type of structure employed by many entrepreneurs. There are various limited company formation packages by the Companies House, depending on your preferred company size.

This post explains everything you should know if you plan to set up a limited company in the United Kingdom.

About a Limited Company

About a Limited Company

To have a registered and running limited company, you should be ready for immense paperwork and accounting, unlike sole proprietorship and partnership business. The company can be owned by one person or by several people.

For a limited company, its liabilities are also limited. Unlike the other structures, the business bears a separate identity from its owners, the directors, and shareholders. The business can own assets and can incur debts on its own. It can also sue or be sued. This means the company’s finances are separate from the owner’s, and in case the business fails, nobody can sue any of the owners for its debts.

What are the Benefits of a Limited Company?

There are various benefits of running your business as a limited company;

  • Limited liabilities, debts, or legal action: company owners, if any, get protection against bankruptcy if the business fails.
  • The efficiency of tax. In a limited company, corporation tax is lower; you pay tax through the business and not through your salary. This is lower than what a sole trader would pay.
  • More professional. A limited company is considered significant and more professional. This is important in the case where your target clients are other businesses or government institutions. In this case, it is easier to find suppliers, investors and easy to sell your business if need be.
  • If you employ staff, you can pay them through the Pay As You Earn (PAYE) scheme.

When setting up a limited company, there are several legal responsibilities to take care of. It might take you a long time to process compared to the other business structures. When you set up the company, all the information about it is found publicly online.

How Do You Set up a Limited Company?

Follow the following procedure to set up your limited company

1. Confirm if Setting Up a Limited Company Suits You

Confirm if Setting Up a Limited Company Suits

Many entrepreneurs in the UK are sole traders. As we mentioned, sole proprietorship requires few legal responsibilities to make it easier than the limited company. However, sole traders have unlimited liabilities.

It would help if you thought about the risks involved in the business type you are about to start. Please get professional advice to see if your business should be limited.

2. Choose an Appropriate Name for Your Company

You’ve sought professional advice and decided to go for a limited company! What next?

There is no sharing of a name by two or more limited companies. Therefore, you should come up with a unique and original name that suits your company. Make sure none of the existing businesses bears the same name.

The name you choose should not bear offensive words, as the Companies House has a list of words and phrases not allowed.

Check online to see if the name you come up with is available for use as a URL using a domain checker.

3. Choose the Directors; Decide on the Number

A limited company should have one or more directors, depending on your preference. The directors should be 16 and over. They should not have to live in the UK, but the company must bear the UK address.

4. Decide Who the Shareholders Should Be

In a limited company, you should have at least one shareholder who can also be one of the directors. There is no limit on the no of shareholders.

After deciding who the shareholders are, you must indicate the number of shares and their value and the basis on which they are issued.

5. Prepare Documentation

Prepare Documentation

After deciding on the shareholders, you can now prepare documents, memorandum, and articles that show how you will run your company.

  • Memorandum of association; a legal document signed by all parties that shows all the directors’ names and addresses.
  • Article of Association; a document stating the rights of the shareholders and the powers that the directors have on the company

6. Record Keeping

At this point, you decide on the appropriate records to keep. These are the records about the company and the financial and accounting records. In other words, the documents include all the finances received and spent by the company.

7. Register the Company

After observing all the above protocols, you are now ready to register your limited company. There are various methods to register the company: with the one being registering it via the Companies House website that costs £15.

You’re required to present the residential address of all the company’s directors to the Companies House. You also need to provide the address and statement of the capital of your registered company.


Running a limited company in the UK and everywhere comes with several mandates. There are also many benefits that you can bank on. All you need is the preparation and execution of the required steps to get up and running.