Streamline Your Limited Company Set Up

Mar 17, 2024

While we offer a free company formation service for all of our new accounting clients, we still have a handful of new clients that come to us with a pre-formed limited company. For those who are looking to make a move into contracting, the company formation process is usually the first place they start, so today’s blog is for those people who are looking into the process of company formation. The process itself is very simple, costs only £12, and is usually done within 24 hours.

Setting up a limited company in the UK involves a number of straight forward steps. If you’re puzzled by the process, our guide on setting up a limited company will clearly outline the required actions, from naming your company to the assignment of directors and shareholders. We’ll provide insights on protecting personal assets, legal documentation, and managing annual filings. This article serves as a practical roadmap, aiming to simplify the formation process and shine a light on the responsibilities that come with running a limited company.

Key Takeaways

  • A distinctive and unique company name that complies with Companies House rules can be crucial for branding and industry positioning, which can be verified through their ‘Search the register’ tool.
  • A large number of our contractor clients will often just incorporate their name into a new company name eg “Consulting for Tomorrow by Smith Ltd” (which is still available at time of writing).
  • Structuring a limited company involves selecting appropriate directors and shareholders, with directors bearing ultimate legal responsibility for company operations and records, while shareholder agreements outline ownership expectations and protections.
  • Setting up a private limited company in the UK garners benefits like personal asset protection due to limited liability, compliance requirements including annual filings and possibly VAT registration, and the potential engagement of professional accountants for financial management and growth planning.

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Choosing the Perfect Name for Your UK Limited Company

a brainstorming session for choosing a company name

Setting up your UK limited company commences with identifying the perfect name. A unique and memorable name significantly contributes to your company’s identity and brand. What approach should you adopt to make your chosen name distinct, while still adhering to Companies House guidelines?

Initially, you must verify the uniqueness of your chosen name, ensuring it’s not overly similar to any existing names. Companies House offers a ‘Search the register’ tool for this purpose. Yet, remember that innovative spelling changes, like adding spaces or altering the case of letters, won’t differentiate your name due to Companies House’s non-recognition of such variations.

Also keep in mind there is a fairly long list of sensitive words and expressions that require prior approval to use in a company or business name. You can see the full list here.

Finally, exercise caution when including words deemed similar, such as ‘UK’, ‘GB’, ‘services’, and ‘international’. These may not sufficiently differentiate the company name. Nonetheless, using a name similar to an existing one could be feasible with the existing entity’s written consent.

Structuring Your New Business: Directors and Shareholders

After pinpointing the ideal name for your UK limited company, you’ll need to structure your business, which encompasses deciding on the number of directors and shareholders. Here are some key points to consider:

  • A director must be at least 16 years old to be appointed as an officer of a limited company.
  • A limited company can be formed by only one person who can assume the role of director (several years ago a minimum of two people were required)
  • The number of directors should align with the specific needs and complexity of the limited company, but for our typical ltd company contractor clients they will add just themselves as a director, and possibly also add a spouse as director.

Shareholders, on the other hand, can be individuals or entities who own at least one share in a limited company. This ownership structure allows for a clear delineation of responsibilities and rights within the company, creating a solid foundation for your business. Let’s delve deeper into the roles and responsibilities of directors and shareholders but broadly speaking it’s the directors who are running the business on behalf of the shareholders.

For our typical ltd company contractor clients, they will add themselves as a shareholder, and possibly also add a spouse as shareholder.

Director’s Responsibilities

As the driving force behind a company’s strategic direction, a director plays a critical role in a limited company. A director must follow the company’s rules as shown in its articles of association and provide explicit consent to act in this role. However, becoming a company director is not merely about steering the company towards success; it comes with a set of legal responsibilities.

First and foremost, a director is responsible for:

  • Keeping company records
  • Reporting changes
  • Filing accounts and the Company Tax Return
  • Ensuring the payment of Corporation Tax.

Despite the directors’ ability to delegate management tasks, they retain legal responsibility for the company’s records, accounts, and performance. They are also legally accountable for ensuring the company satisfies all its filing requirements. Non-compliance could lead to penalties, director disqualification, or even legal prosecution.

This is an important point for our clients. Even if they have an accountant appointed, responsibility for the business still lies with them.

Furthermore, individuals are disqualified from being company directors if they have been declared bankrupt, have unspent convictions related to dishonesty or fraud, or have been disqualified by court order. Even directors living outside the UK must still fulfill their legal responsibilities and adhere to both UK and local laws and regulations.

Shareholder Agreements

While directors steer the company, shareholders are the owners of the company, each holding at least one share. Shareholder agreements are contracts that outline the stakes and expectations of shareholders, providing safeguards for their investment and establishing guidelines for company operation and share trading. These agreements are crucial for minority shareholder protection and determining when shareholder consent is required for major company decisions or changes.

Before we go any further on this, let’s just point out that nearly our entire client base of ltd company contractors do not have shareholder agreements. Where there is just one shareholder, there’s no need for a shareholder agreement. Shareholder agreements tend to be useful where there are several owners of the business.

To effectively manage potential disputes, shareholder agreements may cover areas such as conflict resolution between directors and members, share transfer stipulations, and procedures for shifts in business strategy. The recognition and preservation of minority shareholder interests are key in drafting an agreement that satisfactorily captures the intentions of all parties.

These agreements also delineate the differences between shareholders’ and directors’ roles in decision-making, making clear which actions require shareholder approval. Notably, shareholder agreements can encompass non-standard voting rights allocations, such as amplified voting privileges for particular shareholders, or voting structures deviating from the one-share-one-vote principle.

Protecting Personal Assets: The Benefits of a Private Limited Company

One of the key benefits of establishing a private limited company is the protection it offers to your personal assets. It is the most popular type of company registered in the UK, set up to make a profit while offering limited liability protection. It functions as a separate legal entity from its directors and shareholders.

Shareholders of a private limited company have their liability for company debts limited to the value of their shares, thereby protecting their personal assets beyond the amount they have invested. This means that if the company encounters financial difficulties, the personal assets of the shareholders are not at risk. Most often for our clients the value of their shares is nominal, say £1 or £10. 

Incorporating as a limited company safeguards shareholders’ and directors’ personal finances from legal repercussions, providing a shield against company insolvency issues. Keep in mind that this protection isn’t limited to just financial liability, as it also encompasses legal liabilities, thus furnishing a holistic protection for personal assets.

The separation offered by a business bank account, including financial services compensation scheme protection, further guards personal assets against business liabilities. This separation not only provides a clear delineation between personal and business finances but also adds a layer of professionalism to your business.

Navigating the Company Formation Process with Ease

man sitting on couch sorting through company formation documents

Having explored the fundamentals of setting up your limited company, we can now proceed to the actual formation process. While the company formation process may initially seem daunting, it becomes straightforward with the right guidance. Regardless of whether you’re registering a company through a formation platform or directly with Companies House, following a series of steps is necessary.

To register your company, follow these steps in the company registration process:

  1. Verify the availability of your desired company name.
  2. Investigate the different company registration packages offered by service providers, including the company’s registered office address service options.
  3. Complete the company formation application with details like the UK registered office address, and directors and shareholders information.

Preparation of Memorandum and Articles of Association

The preparation of the memorandum and articles of association is a significant component of the company formation process. The memorandum of association is a legal statement signed by all initial shareholders, expressing their agreement to form the company. For online company registrations, this document is auto-generated, eliminating the need for the applicant to create it.

The articles of association, on the other hand, are written rules about running the company agreed upon by the shareholders, directors, and the company secretary (if there is one). These rules cover a wide range of topics, including directors’ powers and responsibilities, shares and distribution of dividends, and member decision-making processes.

Companies can use standard model articles provided by the Companies (Model Articles) Regulations 2008 or create bespoke articles to send to Companies House when applying to form the company. This gives companies the flexibility to either use pre-existing rules or create their own tailored to their specific needs.

We register all new companies for our clients online, so the memorandum of association statement is auto-generated, and we use the standard model articles from The Companies (Model Articles) Regulations 2008. Using these company documents makes the formation process fast and simple.

Formation and Filing with Companies House

Having prepared all your company details, the subsequent step is to submit them to Companies House using their formation service.

You might want to use a company formation agent to help with the formation. After a quick Google search you will find several that offer various company formation packages. Or else take a look at our Companies House formation step-by-step guide takes you through the entire formation process.

Through the formation process you’ll get a government gateway ID and password. These can now be used to file changes/updates online using the Companies House WebFiling service and utilizing the authentication code sent upon registration is necessary.

A wide array of company changes such changes of company details, officer appointments, and a change in registered office address can be processed online. This ensures that your company remains updated and compliant with Companies House regulations.

Unlocking Business Opportunities with a Free Business Bank Account

With your company now officially registered, it’s time to set up a business bank account. New businesses have a variety of free banking options such as TideWiseCashplusRevolut, and Starling.

These options ensure minimal paperwork and offer a choice of financial providers, allowing you to choose the one that best suits your business needs.

Business bank accounts are more than just a place to store your business funds. They can also be a tool that can unlock new opportunities for your business. For instance, some business banking partners offer free customer support, which can be invaluable for a new business navigating the complexities of banking and finance.

Moreover, a business bank account can help:

  • Separate your personal and business finances, making it easier to manage your money and keep track of your business’s financial health
  • Add a level of professionalism to your business.

So, whether you’re just starting out or looking to switch from your current provider, consider exploring free business bank account options. You might be surprised at the range of services and perks available that can help manage your finances efficiently and unlock new opportunities for your business.

Maintaining Compliance: Annual Filings and Confirmation Statement

Having set up your limited company and business bank account, maintaining compliance with Companies House regulations should be your focus. This involves the preparation and submission of annual accounts and confirmation statements. UK limited companies are obligated to prepare and file annual accounts with Companies House within 9 months after the end of the company’s financial year.

Even dormant companies, which are not actively trading, are required to file confirmation statements and dormant accounts with Companies House. They must also inform HMRC of their dormant status. This ensures that all companies, regardless of their trading status, maintain compliance and stay up-to-date with their filings.

A confirmation statement must be filed by every UK company at least annually. This confirms that the company’s details on the public register remain up to date. The review period for the confirmation statement is 12 months, starting from the date of incorporation or the last statement filed, with a subsequent 14-day filing deadline.

It’s also important to note that companies must report changes such as a change of company name, registered office address, or share capital to Companies House, typically within 14 days of the change. Companies must also register for Corporation Tax with HMRC within 3 months of beginning to trade, and they are required to file Company Tax Returns and pay tax on profits.

Deciding If You Need VAT Registration

VAT registration is another important factor to consider for your UK limited company. Companies with an annual taxable turnover surpassing £85,000 (£90,000 from 01 April 2024) are required to register for VAT. This rule applies even when the current turnover falls below the threshold but is projected to exceed it within the next 30 days.

Businesses may opt for voluntary VAT registration even when their turnover is below £85,000 for potential benefits such as reclaiming VAT on purchases. However, businesses that only deal in VAT-exempt goods or services are not required to register for VAT. Should your business temporarily exceed the threshold, you may also apply for an exception from VAT registration if you can prove that your turnover will fall below the deregistration threshold in the following 12 months.

Our Comprehensive Guide to VAT Registration covers off all the detail you need.

Planning for Success: The Role of an Accountant

Establishing a limited company encompasses numerous financial and legal considerations, ranging from maintaining compliance with Companies House to managing VAT and Corporation Tax. Although you can manage these tasks independently, many businesses opt to engage a professional accountant.

An accountant can help you navigate tax compliance, reporting, and business growth strategies. They can help ensure that your annual filings and confirmation statements are accurate and timely, thereby helping you avoid penalties and maintain your company’s legal standing.

So, whether you’re just starting out or looking to take your business to the next level, consider enlisting the help of an accountant. Their expertise and guidance can prove invaluable in planning for success and navigating the complexities of running a limited company, while giving you the time you need to focus on your business.

Launching Your Company Today: Start the Formation Process Now

You’ve now gained knowledge about the various steps and considerations involved in setting up a UK limited company. Equipped with this information on how to select the perfect name and maintain compliance with annual filings and confirmation statements, you’re ready to start your own business.

So why wait? Start the formation process today and register directly with Companies House. This process costs £12 and can be paid by debit or credit card. Your company is usually registered within 24 hours.


We’ve taken a look at the world of setting up a limited company, unravelling the complexities and providing you with a clear roadmap to success. From choosing the perfect company name and structuring your new business to filing with Companies House and maintaining compliance, we’ve covered the essential steps to setting up a limited company in the UK.

As we wrap up, remember that the journey to entrepreneurship is filled with challenges and opportunities. But with the right knowledge and resources, you can navigate this terrain with ease and confidence. So go ahead, take that first step, and embark on the exciting journey of setting up your limited company.

Elevate Your Accounting Experience

Dive into a world of exceptional tax, planning, and accounting solutions crafted for freelancers like you.

Take charge of your financial future.
Email us, call us, send a message from our Contact Us page, or even sign up online right away.

Your path to financial clarity starts here.

No Worries accounting logo

Frequently Asked Questions

Can I set up a Ltd company myself?

Yes, you can set up a Ltd company yourself by registering with Companies House or using a professional agent for a quicker and easier process. It’s common for contractors to set up a company as a sole shareholder and director.

Is it a good idea to set up a limited company?

Setting up a limited liability company can be a good idea for a UK-based contractor or freelancer because it offers personal liability protection, can be tax-efficient, and enhances your professional image. Operating as a limited company allows you to keep your personal assets separate from your business, and potentially leads to tax savings, especially if you retain profits within the company or pay dividends. It also tends to make your business appear more credible and established to clients. However, there are also some drawbacks to consider, such as increased administrative responsibilities, higher accountancy fees, and the potential impact of IR35 legislation on your tax status.

What are the requirements to be a limited company?

To start a limited company, you need to choose a company name, a registered office address, at least one director, service address, and at least one shareholder (the director and shareholder can be the same person). Once done, you will have to register the new company with Companies House.

How do I choose the perfect name for my limited company?

To choose the perfect name for your limited company, ensure it is unique, easily spelled, and memorable. Use the ‘Search the register’ tool provided by Companies House to check its uniqueness and avoid names too similar to existing ones to prevent confusion.

What are the responsibilities of a company director?

A company director in the UK has several key responsibilities under the law to ensure the proper governance and management of a company. These include acting within their powers as set out in the company’s constitution, promoting the success of the company for the benefit of its members as a whole, exercising independent judgment, and exercising reasonable care, skill, and diligence. Directors must avoid conflicts of interest, not accept benefits from third parties that are offered because of their position, and declare any interest in a proposed transaction or arrangement with the company. They are also responsible for ensuring that the company complies with its statutory obligations, such as filing annual accounts, tax returns, and other required documents with Companies House and tax authorities on time.

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