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Part of Set up a limited company: step by step

Set up a private limited company

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1. Limited companies

A limited company is one way to set up a business. It is legally separate from the people who own it.

A company director is responsible for running the business.

This guide is also available in Welsh (Cymraeg).

Private limited company responsibilities

You’ll have some legal, financial and other responsibilities when running a limited company.

A limited company has ‘limited liability’ which means owners are responsible for business debts only up to the value of their financial investment. This can give you protection if things go wrong.

Finances

There are rules to follow when taking money out of a limited company.

Limited companies can apply for business loans and investments.

Keeping records and accounts

Directors have responsibilities they must follow when running the company including:

Directors can hire other people to help (for example, an accountant) but they’re still legally responsible for the company’s records, accounts and performance.

Naming your business

You must follow the rules when choosing a name for your business.

Registering the limited company

You will need to register your company before you start trading. You’ll find out how to register during the set up process.

You do not need to start trading straight away - you can leave your company dormant.

Taxes

The company will need to pay taxes on its profits. People who take money out of the company may need to pay tax on the income.

The limited company will need to:

You can choose to register for VAT before it meets the requirements if you want to reclaim VAT on business expenses.

You may need to pay tax when taking money out of a limited company.

Find out about tax reliefs for limited companies to reduce your tax bill.

Rules for your type of business

You may have other responsibilities depending on what your business does.

Check if you need:

There are also rules you must follow if you:

Where you work

Check what your responsibilities are if you:

If you rent or buy a property, you may have to pay business rates. Small businesses can apply for a discount on business rates and some may pay nothing.

Check if you can claim office, property and equipment as expenses.

Taking on people to help

There are things you’ll need to do if you take on your own employees. You’ll have more responsibilities, including:

If you take on agency workers or freelancers you have some responsibilities, for example their health and safety.

Help and support

You can get help with setting up your business.

2. Types of limited company

There are 2 types of limited company:

  • limited by shares
  • limited by guarantee

The type you choose will depend on your company’s ownership structure and whether it intends to make a profit or not.

Limited by shares

Most companies are ‘limited by shares’. This means the company:

  • raises investment by selling shares in the company
  • is owned by shareholders who have bought shares and have certain rights  
  • pays shareholders profits from the company through dividends
  • may need its shareholders to vote and agree on changes to the company

A shareholder’s liability is limited to the amount they originally invested into the business.

A company can have one shareholder who owns the whole company and acts as its only director.

Limited by guarantee

Usually companies limited by guarantee are ‘non-profit’ or registered as a charity.

Companies limited by guarantee have guarantors and a ‘guaranteed amount’ instead of shareholders and shares.

This means the company:

  • usually gets investments from grants, donations or membership fees
  • is owned by its guarantors who have offered to guarantee an amount of money
  • invests its profits back into the business instead of paying them to its owners

A guarantor’s liability is limited to the amount of money they’ve guaranteed, which they will need to pay if the company cannot pay its debts.

A company can have one guarantor who owns the whole company and acts as its only director.

3. Choose a company name

You must choose a name for your business if you’re setting up a private limited company.

There are different rules for sole traders and business partnerships.

Your name cannot be the same as another registered company’s name. If your name is too similar to another company’s name or trade mark you may have to change it if someone makes a complaint.

Your name must usually end in either ‘Limited’ or ‘Ltd’. You can include the Welsh equivalents ‘Cyfyngedig’ and ‘Cyf’ instead if you registered the company in Wales.

Check the Companies House register.

‘Same as’ names

‘Same as’ names includes those where the only difference to an existing name is:

  • certain punctuation
  • certain special characters, for example the ‘plus’ sign
  • a word or character that’s similar in appearance or meaning to another from the existing name
  • a word or character used commonly in UK company names

Example

‘Hands UK Ltd’ and ‘Hand’s Ltd’ are the same as ‘Hands Ltd’.

You can only register a ‘same as’ name if:

  • your company is part of the same group as the company or Limited Liability Partnership (LLP) with the existing name
  • you have written confirmation that the company or LLP has no objection to your new name

‘Too like’ names

You may have to change your name if someone complains and Companies House agrees it’s ‘too like’ a name registered before yours.

Example

‘Easy Electrics For You Ltd’ is the same as ‘EZ Electrix 4U Ltd’

Companies House will contact you if they think your name is too like another - and tell you what to do.

Other rules

Your company name cannot be offensive.

Your name also cannot contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities, unless you get permission.

Example

To use ‘Accredited’ in your company’s name, you need permission from the Department for Business and Trade (DBT).

You can read more guidance on naming your company and which words you need permission to use if you’re not sure.

Trading names

You can trade using a different name to your registered name. This is known as a ‘business name’.

Business names must not:

  • include ‘limited’, ‘Ltd’, ‘limited liability partnership, ‘LLP’, ‘public limited company’ or ‘plc’
  • contain a ‘sensitive’ word or expression unless you get permission

If your business name is too similar to another company’s trade mark you may have to change it if someone makes a complaint.

Displaying your name

There are rules you must follow about displaying your company name.

When you do not have to use ‘limited’ in your company name

You do not have to use ‘limited’ in your name if your company is a registered charity or limited by guarantee and your articles of association say your company:

  • promotes or regulates commerce, art, science, education, religion, charity or any profession
  • cannot pay its shareholders, for example through dividends
  • requires each shareholder to contribute to company assets if it’s wound up during their membership, or within a year of them stopping being a shareholder

4. Check the rules for registered office addresses and email addresses

You must provide a registered office address and email address when you set up a limited company.

Registered office address

The address you register must be:

  • a physical address in the UK
  • in the same country your company is registered in, for example a company registered in Scotland must have a registered office address in Scotland

The address must also be ‘appropriate’. This means that:

  • you or someone acting on behalf of your company will be made aware of any post addressed and delivered to your company
  • when your company receives post at this address, it’s possible for the sender to get confirmation of delivery

You can no longer use a Royal Mail PO Box as your registered office address. This includes similar services from other companies.

If you use a service provider’s address (for example, an accountant or solicitor) as your registered office address, this address must meet all of these requirements.

Your company could be struck off the Companies House register if you do not provide a registered office address that meets all of these requirements.

Keeping your address private

Your company’s registered office address will be publicly available on the online register. 

If you do not want an address to be publicly available (for example, if it’s someone’s home), you should not use it as your company’s registered office address. You can either:

  • use a different address, such as the address of an accountant or solicitor - you must get their permission first
  • appoint an agent who will give you an address to use

You must have the address in place before you register your company.

Registered email address

You must provide an email address and read any emails that your company receives.

The email address you provide will not be published on the public register.

Companies House may use this email address to contact you about your company.

5. Appoint directors and a company secretary

Your company must have at least one director. Directors are legally responsible for running the company and making sure company accounts and reports are properly prepared.

A director must be 16 or over and not be disqualified from being a director.

Directors do not have to live in the UK but companies must have a UK registered office address.

Directors’ names and personal information are publicly available from Companies House.

Directors must provide a service address (or ‘correspondence’ address), which will also be publicly available. If they use their home address, they can ask Companies House to remove it from the register.

Company secretaries

You do not need a company secretary for a private limited company. Some companies use them to take on some of the directors’ responsibilities.

The company secretary can be a director but cannot be:

  • the company’s auditor
  • an ‘undischarged bankrupt’ - unless they have permission from the court

The restrictions placed on a person when they’re made bankrupt usually end when they’re free from their debts (known as ‘discharged’). You can check if someone has been discharged using the Insolvency Register.

Even if you have a company secretary, the directors are legally responsible for the company.

6. Choose your shareholders for companies limited by shares

A company limited by shares must have at least one shareholder, who can be a director. If you’re the only shareholder, you’ll own 100% of the company. There’s no maximum number of shareholders.

Shareholders can:

  • control the company and make important decisions
  • be paid a share of the company’s profits through dividends
  • use their votes to agree on changes to the company

You’ll need to provide information on your shares and shareholders when registering your company.

Companies limited by guarantee have guarantors and a ‘guaranteed amount’ instead of shareholders and shares.

Work out your shares

The price of an individual share can be any value. Shareholders will need to pay for their shares in full if the company has to shut down. You can choose a low share value (for example, £1) to limit the shareholders’ liability to a reasonable amount.

You can issue different types (or ‘classes’) of shares. Shareholders get different rights depending on the class of the share.

Most companies limited by shares are set up with one class of share, which is normally ‘ordinary’.

Shareholders with ordinary shares will usually get one vote on company decisions per share, and be paid dividends.

A shareholder who owns more than 25% of shares or voting rights in a company is classed as a person with significant control (PSC).

7. Choose guarantors for a company limited by guarantee

When setting up a company limited by guarantee you must have at least one guarantor and a ‘guaranteed amount’.

Guarantors:

  • are company members
  • control the company and make important decisions
  • do not usually take profit from the company - instead the money is kept within the company or used for other purposes
  • can also be a director of the company

When registering your company you’ll need to provide information on your guarantors and their guaranteed amount.

Companies limited by shares have shareholders and shares instead of guarantors and a guaranteed amount.

Guaranteed amount

Guarantors promise an agreed amount of money to the company if it cannot pay its debts. This is the ‘guaranteed amount’.

If the company cannot pay its debts, the guarantor must pay the full amount of the guarantee to the company.

This payment covers guarantors for situations such as the company being closed down. The guaranteed amount is not linked to how much the company is worth - you choose how much they pay.

You can set the guaranteed amount to a low value (for example, £1) to limit a guarantor’s liability.

A guarantor who owns more than 25% of voting rights in a company is classed as a person with significant control (PSC).

8. Prepare documents agreeing how to run your company

When you register your company you need:

  • a ‘memorandum of association’ - a legal statement signed by all initial shareholders or guarantors agreeing to form the company
  • ‘articles of association’ - written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary

You will also need details of either: 

  • your shares and shareholders - if you’re registering a company limited by shares
  • your guarantors and guarantee amount - if you’re registering a company limited by guarantee

Memorandum of association

If you register your company online, you do not need to write your own memorandum of association. It will be created automatically as part of your registration.

If you register by post, use the memorandum of association template.

You cannot update the memorandum once the company has been registered.

Articles of association

You can either:

  • use standard articles (known as ‘model articles’) - these are the standard default articles companies can use
  • write your own and upload or send them when you register your company

Community interest companies

You cannot use limited company model articles if you’re setting up a community interest company (CIC).

Use the CIC regulator’s model constitutions instead.

How to supply details of your shares and shareholders

When you register a company limited by shares you need to include details of your shares and shareholders. This information goes in a document called the ‘statement of capital’ that you send to Companies House during registration.

Statement of capital and prescribed particulars

When supplying details of your shares and shareholders you must include:

  • the names and addresses of all shareholders - known as ‘subscribers’ or ‘members’
  • the number of shares of each type the company has and their total value - known as the company’s ‘share capital’

Share capital is not linked to how much the company is worth.

Example

A company that issues 500 shares at £1 each has a share capital of £500. 

You also need to include information in your statement of capital about what rights each class of share gives the shareholder. This information is known as ‘prescribed particulars’ and must include:

  • what share of dividends they get
  • whether they can exchange (‘redeem’) their shares for money
  • whether they can vote on certain company matters
  • how many votes they get

How to supply details of your guarantors and guaranteed amount

When registering a company limited by guarantee, you need to include details of your guarantors and guaranteed amount. This information goes in a document called the ‘statement of guarantee’ that you send to Companies House during registration.

Statement of guarantee

When supplying details of your guarantors and guaranteed amount you must include:

  • the names and addresses of all guarantors - known as ‘members’
  • the amount each guarantor has agreed to contribute if the company cannot pay its debts

The statement of guarantee must also set out information on the purpose and scope of the guarantee, including that guarantors:

  • are liable for no more than the amount they guarantee
  • will need to pay the guaranteed amount in the event that the company cannot pay its debts
  • will need to pay the guaranteed amount if they stopped being a member in the 12 months before the company closed

Example

A member has guaranteed £1 in the statement of guarantee. If the company cannot pay its debt while they are a member, or within 12 months of them closing down, they’ll need to pay £1.

Each guarantor needs to sign the statement of guarantee.

9. Register your company

Use this service to register your company with Companies House. You will usually be set up for Corporation Tax at the same time, unless your company or association is ‘dormant’.

You may need the Companies House personal code you received after verifying your identity to register your company.

This guide is also available in Welsh (Cymraeg).

You’ll also confirm your people with significant control (PSC) during registration. For example, this could be anyone with more than 25% of the shares or voting rights.

You’ll get a ‘certificate of incorporation’. This confirms the company legally exists and shows the company number and date of formation.

It costs £100 and can be paid by debit or credit card. Your company is usually registered within 24 hours.

You can also use this service to:

  • register for PAYE to tell HMRC you’re employing staff (including yourself if you’re the only director)
  • continue an application if you’ve already started registering

If you do not want to use ‘limited’ in your company name you must register by post.

Register now

You’ll need to create a Government Gateway user ID and password for your company when you register it. You cannot use your personal Government Gateway ID.

Find local advice and free support for your business on business.gov.uk.

Verifying your identity

Before registering your company, you may need to verify your identity using GOV.UK One Login. You’ll get a unique personal code to prove you’ve verified your identity.

If your company has more than one director, you must have each director’s personal code.

If you do not have a personal code

If you have not verified your identity for Companies House before, you can verify your identity online.

You only need to verify your identity once.

If you already have a personal code

You can find your personal code in your Companies House account.

Other ways to register

You can also register:

When you get your 10-digit Unique Taxpayer Reference (UTR), you’ll need to add Corporation Tax services to your business tax account.

Register by post

You can register by post using form IN01.

Postal applications take 8 to 10 days and cost £124 (paid by cheque made out to ‘Companies House’).

Send your application to the address on the form.

10. Add Corporation Tax services to your business tax account

You can add Corporation Tax services to your business tax account if you registered your company with Companies House:

If you have already added Corporation Tax services to your account, sign in to HMRC online services to file your Company Tax Return or make a payment.

When to add Corporation Tax services

You should add Corporation Tax services to your account when you start to do business. This includes buying, selling, advertising, renting a property and employing someone.

If your company is not doing business, it is usually ‘dormant’ for Corporation Tax.

What you’ll need

To add Corporation Tax services to your business tax account, you’ll need:

  • your company’s registration number 
  • the date you started to do business (your company’s first accounting period will start from this date) 
  • the date your first accounts are made up to
  • your company’s 10-digit Unique Taxpayer Reference (UTR) - you can find your UTR on any letter from HMRC

If you did not get a UTR 15 working days after registering your company, you can request your company’s UTR online.

Check your registered office address is correct before setting up your company for Corporation Tax. This is where all letters are sent. If this address needs to be updated, you must tell Companies House.

How to add Corporation Tax services

  1. Sign in to your business tax account using your Government Gateway user ID and password. If you do not have a user ID, you can create one when you sign in.

  2. Select ‘Services you can add’ in the left hand menu.

  3. Find the Corporation Tax service and select ‘Enrol for service’.

What happens next

HMRC will send you:

  • your Corporation Tax activation code within 10 days (21 days if you live abroad)
  • instructions on how to activate the Corporation Tax service 
  • the deadline for paying Corporation Tax

You can request a new activation code if you do not receive one or if your code has expired.

These will be sent by post to your registered office address.

You’ll need to file a Company Tax Return, even if you make a loss or have no Corporation Tax to pay.