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How to Form a Limited Company

October 3, 2017

What do you need to consider when setting up a Limited company for the first time?

 

Methods to form a company

 

Probably the first thing to decide is the method of forming a limited company. This can be done in three different ways:

 

  • You can register the company yourself with Companies House.

  • You can pay a company formation agent or accountant to do this for you.

  • You can buy a on ‘off the shelf’ ready-made company and then change the name, directors etc.

 

Choosing a company name

 

When forming a company, one of the most important decisions will be the company name.  When deciding on a company name you'll need to take the following into account:

 

  • No two companies can have the same or similar names. So you’ll need to check the Companies House Register to make sure the name isn't already taken - otherwise you could find another company complaining!

  • The name of your company must end in Limited or Ltd, or the Welsh equivalent (except for certain charities, sports clubs etc)

  • The name can’t be offensive

  • The name can’t imply a connection with the government, a devolved administration, local or public authority

  • It can’t contain ‘sensitive’ words or expressions without approval

 

And if you’re developing an online presence for your business, if you don't already own the website domain for your company name then we'd recommend you check that the domain is available and get it registered as soon as possible! You can check Namesco first to ensure that the URL is available.

 

Registered address

 

The next step when forming a limited company is deciding on your company’s registered address. This is where all official Companies House and HMRC correspondence is sent.

The address must be:

 

  • A physical address (a PO box can be used but must be followed by a physical address and post code)

  • In the same country as the country is registered in: for example, a company registered in England will to have a registered address in England

 

If you don’t want your home address to be visible then you could use a third party address such as a managed office, accountants or a specific registered office service.

 

You could use your home address, but be aware that this will then be publicly visible on the Companies House register. Additionally, if you are renting a property you may require your landlord’s permission first.

 

Shareholders

 

When forming a limited company you’ll then need to decide who the initial shareholders are going to be. The shareholders will be entitled to dividends and can vote on issues affecting the company. Bear in mind the following:

 

  • The company must have at least one shareholder on formation

  • Shareholders can also be directors

  • There is no upper limit to the number of shareholders

 

You’ll need to decide how many shares you want to issue (either 1 or 100 is a common number – we tend to prefer 100 as it gives more flexibility later if you want to issue shares to someone else) and what the nominal value per share should be (£1 is often used for simplicity).

 

Directors

 

Last and by no means least, the company will need to appoint directors. Directors are legally responsible for running the company and filing all necessary accounts and returns – these are legal duties and directors can be fined if they don’t carry out their duties properly!

 

The company must have at least one director who must:

 

  • be 16 or over

  • not be disqualified from being a director

  • not be an undischarged bankrupt (unless given court permission)

 

Another company can act as a director, but you must have at least one real person as a director.

 

Following registration, directors’ names and home addresses are publicly available on Companies House - although you can avoid having your home address visible if you use a service address.

 

A private limited company doesn’t need a company secretary and most companies formed now only have one or more directors – and no company secretary.

 

Summary

 

Setting up a limited company is fairly straightforward but it's worth talking to an accountant who can undertake most of the work for you and ensure you fully understand your responsibilities as a Director.

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