Should I set up a limited company in the UK?
In this article, we’ll discuss why setting up a limited company is a smart choice, highlight the benefits of forming a company in the UK, and guide you on how to complete the process online in just a few minutes.
Why should you set up a company?
Before we guide you through the company formation process, it’s important to understand what company formation actually is.
Company formation is the process of registering a business as a limited company with Companies House, the UK Government’s official registrar of companies.
There are various types of companies you can form, including private companies limited by shares, private companies limited by guarantee, public limited companies, and more. However, since private companies limited by shares are the most popular, we’ll focus on them.
When you incorporate a limited company, you establish it as a separate legal entity. This separation is crucial for protecting your personal assets. It divides your finances, liabilities, and contracts from those of the company. By doing this, you limit your liability and ensure that your personal assets stay secure if the company faces financial or legal troubles.
Once this separation occurs, as a company owner, your liability for company debts is limited to the nominal value of the shares you own in the company.
Any personal assets or money beyond the value of your shares are legally protected. This protection, known as ‘limited liability,’ safeguards your personal assets.
Forming a limited company can improve your professional image. It shows potential clients and customers that you are established and serious about business. People tend to trust limited companies more than sole traders, which can help you build credibility and grow faster.
A limited company also offers benefits such as better tax efficiency and easier access to raising capital and attracting investors. This structure allows you to expand your business more effectively compared to a sole trader setup.
How do you set up a limited company?
If you’re looking to turn your business into a limited company, you’ll be happy to know that the company formation process is fairly simple. You can register a company online directly through Companies House, by post, or with the help of a company formation agent like Startxpress.
Choosing a formation agent can save you a lot of time and hassle, and we’ll explain the benefits in a moment. But first, let’s break down the company formation process in general terms.
Choose a company name
The first step in forming your company is to choose a name.
There are a few rules to follow when selecting a company name, with the most important being that your name must be unique and not already in use by another limited company in the UK.
For more details on the essential naming rules, take a look at this guide.
Choose a registered office address
Your company’s registered office address is its official location and must be within the jurisdiction where your company is incorporated (England and Wales, Scotland, or Northern Ireland).
There are a few basic rules to follow, the most important being that the address cannot be a PO Box – it must be a legitimate physical address. Additionally, this address will be publicly listed on the official UK company register, which is why many business owners prefer not to use their home address. Startxpress offers a registered office address service, allowing you to use our London HQ as your company’s registered office address.
Appoint a company director
To establish a company, you need to designate at least one director. This individual will be responsible for the daily management of your company.
Appoint a shareholder
To form a limited company in the UK, you must also appoint at least one shareholder.
The same person can serve as both the shareholder and the company director, and there is no limit to the number of shareholders your company can have.
Memorandum and Articles of Association
The memorandum and articles of association are your company’s foundational documents.
You don’t need to worry about drafting these yourself, as they are provided by Companies House and most formation agents during the company formation process.
While you can write your own articles of association if your company’s structure requires it, most new companies opt for the standard Model articles, which are suitable for the majority of incorporations.
Issue share capital
To form a company, you must issue at least one share.
Generally, it’s advisable to issue between 10 and 100 shares, with a nominal value of £1 each.
Choose a Standard Industrial Classification (SIC) Code
The government uses SIC codes to classify the industry in which your business operates. You must select at least one SIC code, but you can choose up to four if your business operates in multiple industries.
Using a company formation agent
Let’s be honest: there’s a lot to keep track of, and it can feel overwhelming if you’re setting up a business for the first time.
That’s where Startxpress comes to the rescue.
When you set up a limited company with Startxpress, we simplify the process into four easy steps:
- Choose your company name
- Select one of our UK company formation packages
- Checkout
- Enter your company details
With a company formation agent, the entire process takes about five minutes to complete. Once you’ve submitted your order, our experienced agents will review your application before submitting it to Companies House on your behalf.
Depending on Companies House’s workload, your company could be officially registered in as little as 24 hours. We’ll then send you your documents, allowing you to start trading that same day. It’s that simple.
But this is just the beginning. To dive deeper into the company formation process, visit the Startxpress Help Center or Blog.
If you’re ready to simplify your company formation and get straight to business, explore our range of formation packages and start trading today.
Do you have any other questions?
Deciding to set up a limited company in the UK is a big step that can shape your business’s future. Understanding the pros and cons is key to making the right choice.
If you’re unsure or need help, Startxpress is here to offer expert advice and support.
For more insights, visit the Startxpress Help Center and Blog. If you need support, reach out at support@startxpress.io!
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