Most individuals entering a business would probably be under the impression that setting up a Limited Company in the UK is expensive and complicated. Far from it, to actually get your “Certificate of Incorporation” as a Limited Company does not involve high costs.
And depending on the option you choose, it can be either a one day affair or it could take ten days, influenced by the Companies House workload. As far as total costs are concerned, depending on the option you choose, you may have to spend as little as £12 or it can go up to £150 + VAT if the services of a professional are used. Here is what you need to know more about company formation.
To set up a limited company in the UK, you can follow these steps:
- Decide if it’s right for you
- Choose a company name
- Appoint at least one director
- Decide who will be shareholders
- Create company documents
- Confirm what records you need to keep
- Register with Companies House
- Consider using company formation packages to simplify the process and access additional services
Requirements to setup limited company
To setup a limited company, you need to fulfill certain requirements. You need a company name that is unique/available, you need an UK address for the company, you need a director for significant control of the company, you need one shareholder, you will need to select an SIC Code (Standard Industrial Classification of Economic Activities) depending on the activity of the business and finally the agreement among stakeholders known as the ‘memorandum and articles of association’. Some company formation services offer a free business bank account as part of their packages.
What Does Incorporation Mean?
Incorporation involves establishing a limited company with Companies House, effectively creating a separate legal entity for your business. By doing so, you can safeguard your personal assets in case of any unforeseen circumstances or failures in your venture.
When you incorporate a company, it becomes a distinct legal entity from yourself, shielding you from personal liability in most cases. Your limited liability and financial responsibility is limited to the amount of money you have invested in the company. Any borrowed funds, share capital, or profits generated by the business are kept separate from your personal finances. It is a legal requirement for limited companies to have a separate business account for financial transactions.
To incorporate a limited company, it is essential to register it with Companies House and provide all the required documents, including the Memorandum and Articles of Association. This process can be relatively simple and typically takes about 24 hours if done online. However, some individuals opt to hire a formation agent or accountant to handle the limited company formation and setup. After receiving the registration approval, you can start operating your business as a limited company.
Registered Office Address (ROA)
When registering a company at Companies House, it is important to note that the company address will be publicly available on the register. This is why many company owners prefer not to use their home address. Instead, it is recommended to provide a Registered Office Address (ROA).
The ROA serves as the official communication address for Companies House and HMRC. It must be a physical address located in the same country where the company is registered.
For example, if the business bank account or company is registered in England, the ROA must be in England. It is permissible to use your home address or the address of your accountant, as long as it meets the necessary requirements outlined by the regulations.
What Is A Memorandum And Articles Of Association?
When setup limited company, it is mandatory to submit a Memorandum and Articles of Association to Companies House. This document serves as a framework that outlines the rules and regulations which directors must follow while managing the company.
The Memorandum is a contractual document that defines the roles and responsibilities of shareholders and the to form a company. It includes the company’s name, registered office address, and the share capital, which represents the total funds invested in establishing the company.
The Articles of Association are a crucial legal document that provides detailed guidelines on various aspects of decision making within a company. It outlines procedures for appointing directors, issuing and transferring shares, and the overall management of the business. It specifies how shareholders can collectively make decisions and ensures proper governance.
Different options available to form LTD Company
Company formation can be concluded through one of many options, listed below:
- Directly registering online with the Companies House
- Directly registering by post
- Registering through an accountant
- Registering through a company formation agent
- Registering using third party software online
- Opting for company formation packages that include various services and optional extras
Actual costs involved to setup limited company
There are actual costs, and there are additional markup costs. If you wish to register electronically yourself, the costs involved are £12. If you wish to register yourself by post, the costs involved are £40. If you desire same day registration through post, by doing it yourself, the costs are £100.
If you use either a formation agent, an accountant or third party software, there will be additional costs involved.
Here, it is important to note that a company may need the services of an accountant for routine operations, and getting an accountant onboard at the earliest will certainly help in establishing a stronger working relationship.
Remember to factor in these business costs to your budget:
When running a business, there are several costs and expenses that you should consider. These include insurance for your buildings, contents, public liability, and professional indemnity.
Marketing and advertising expenses like domain names are also crucial for promoting your products and services.
Additionally, you need to factor in costs for stock or materials to create the items you sell, as well as staffing expenses such as salaries, pensions, and benefits.
Other costs include business bank accounts and credit card processing, overheads like rent, rates, utilities, and communication services. Obtaining a free business bank account can help save on banking costs.
Software and IT expenses for accounting, storage, and customer relationship management systems are also necessary.
Don’t forget about accountancy fees, travel expenses, disbursement costs for postage and stationery, legal advice and fees for contracts and licenses, professional services like web and graphic designers, fees for bookkeeping, payroll, and tax advice, and research and development costs. These costs vary depending on the nature and scale of your business.
Timelines involved to setup limited company
Online registrations take one day for the process to complete, while postal registrations take anywhere between eight to ten days for the registration process. In the case of same day postal registration, the process concludes on the same day. These timelines are on the assumption that everything is in order.
It means that your documentation, your Form IN01 – a collective of various forms, should be in order. If the documentation or the information in the forms are incomplete or incorrect, then delays would stretch the process. This can take long, depending on the nature of the observations. Additionally, the processing time can vary depending on the Companies House workload and any technical difficulties that might arise.
If you choose to use any of the other options, for instance an accountant, a formation agent or third party software, the timelines are the same, with the advantage of getting the registration process completed smoothly.
Company will also need:
- Bank Account
- Opening a separate business account for financial transactions
- HMRC registrations like VAT and PAYE Registration
What happens after my limited company is registered?
Once your company has been successfully registered, you will be issued a Certificate of Incorporation. This document serves as official proof of your company’s legal existence and includes vital company details, such as your company name and formation date.
Registering online for a business has the advantage of automatically registering for Corporation Tax as well. However, if you must register your company by post or through a formation agent, you must separately register for Corporation Tax within three months of starting your business.
Advantages of using an accountant
Regardless of how you choose to get your company registered, you will need to register for Corporation Tax within three months of commencing business. This will certainly involve the use of an accountant at some stage.
Having an accountant right from the registration stage, helps you to develop a strong relationship that will foster smoother functioning uk company and quicker turnaround for all your future requirements. Even if you are non-uk resident, you can also setup limited company in the UK.
As your company grows and expands, your accountant will have complete knowledge, which will help the accounting services to help you avail all legitimate exemptions and ensure that your tax liabilities and exposure is kept low, legally.
The single biggest advantage of having an accountant complete the process of registration on your business banking behalf, is the fact that your first step towards setting up a limited company will not falter.
There will be qualified and experienced scrutiny of the documents and requirements by the accountant, which means that your registration process will be smooth and free from all hassles.
Working with an established third party greatly simplifies the process of starting a company. They handle all the necessary paperwork, filing, and notifications, allowing you to launch your business quickly.
Moreover, they offer valuable guidance and advice on setting up and managing your new venture. This streamlined approach is beneficial, resulting in a smooth and efficient establishment of your new company.
When choosing a formation agent, it’s crucial to consider whether you’re paying for services you actually require.
It’s advisable to conduct thorough research and ensure that the agent offers a package tailored to your needs. Avoid unnecessary or additional extras that may end up costing you more than necessary.
Company Formation UK – Frequently Asked Questions (FAQs)
Do I have to live in the UK to register a company here?
In the UK, a director of a company can reside anywhere globally. However, it is mandatory for company directors to have a registered address in the UK to establish a business presence. This requirement allows non-UK residents to operate companies within the country.
Do I need other directors to form a private limited company?
The process of setting up a company varies depending on whether it is a private limited company or a public limited company. For a private limited company, it is possible to establish it with a single director or shareholder. In contrast, company formation process a public limited company requires a qualified secretary and a minimum of two directors, each being distinct individuals.
Who can be a limited company director?
A company director can be an individual or another corporate entity, such as digital company such as a partnership or another limited company.
According to corporate regulations, every company is required to have a director who is a ‘natural person’, meaning an actual human individual, as opposed to a corporate entity or organisation.
Directors have to meet certain qualifications, including being older than 16. They should not be disqualified or bankrupt to serve as a director.
Can I form my limited company myself or should I use an agent?
To register your limited company, you have several options. You can choose to complete the process yourself online or by using a postal IN01 form.
Alternatively, you can enlist the help of a formations agent who can handle the incorporation process for you. Your solicitor or accountant may offer this service, or you can explore agencies that specialize in various company limited formations. Additionally, company formation packages can simplify the process and provide additional services, making them suitable for businesses of all sizes and budgets.
How do I register a limited company as dormant?
Registering a limited company and leaving it dormant can serve various purposes. It may be advantageous for protecting a brand name or trademark, as well as utilizing it for asset or intellectual property holdings.
During the company registration process, you can inform both HMRC and Companies House of your intention to maintain the company dormant. This can be a strategic move for certain business objectives or future plans.
