Why Set Up a Limited Company?
Ok, so you have decided to start a business! The next step is to set up a company. What type of company should you setup ltd, plc, or sole trader?
This article will explain how to go ahead with a Limited Company Setup. A Limited company can be referred to as LTD or the word limited in full. In essence they are the same thing but you must choose which you prefer as you cannot change this once incorporated.
The structure chosen for setting up a limited company will define the way your company operates, the officer’s responsibilities, the management structure and the legal obligations of the company. Be sensible in choosing the company set up; be certain it works for your business and make sure the duties are those you are willing to carry out.
The most common company set up is the Ltd company set up, which is used by profit making organisations with trade/commercial activity in the UK and the world. The merits of a setting up limited company business up are many and include tax, managerial and operational advantages. But more importantly, the ltd company set up deliberately lowers your personal financial risks. Your financial liability is limited and can be controlled -by the amount you choose to invest.
FACT: The Limited Company (limited by shares) is the most common type used when setting up a limited company in the UK and other developed countries.
What are the Advantages of setting up a Limited Company?
Once the Ltd Company set up is complete you own a legal entity in which your personal financial risk is limited to your investment in the company. You use the Ltd Company to organise and operate your business.
- A business operating under a limited company setup can carry on in despite of death, resignation or bankruptcy of a shareholder or person managing the business.
By setting up a limited company, you add credibility to the business; it can make it easier to borrow money and expand the business; it gives customers and suppliers a sense of confidence. And as a bonus, the limited company is subject to a more favourable tax regime. Corporation taxes for a limited company are as follows:
- 20% with profits of up to £300,000
- 24% with profits of more than £1.5 million
- Marginal relief is available to companies whose profits fall between these two rate bands.
What are the disadvantages of a Limited company?
- After you have set up a limited company, the administrative/regulatory paperwork is heavier than a sole trader or partnership.
- If a director fails in their duties, they can be held legally responsible for debt and face other penalties.
- The register containing incorporation information, filed accounts and financial reports is public and can be seen by anyone (for a small fee).
How to Set Up a Limited Company?
We are here to assist with your setting up of a Ltd Company. Setting up a limited company online through our system is easy, simple and fast.
What information will you need to have by hand to register a company?
- Registered office — a company must have a registered office that is on all official company documentation (this does not have to be the usual business or trading address). This address will be displayed on Public Records and will find its way onto internet records.
We can provide you with such an address at an additional fee if required.
- Company Name — when setting up a limited company you need a name to register the business with. It must feature the word ‘limited ‘or ‘ltd’ at the end. The name may not include sensitive words or expressions that are listed by Companies House, without permission; the name cannot suggest an association with government; it must not be offensive; it must not be the same or similar to one already registered. Using our Search engine will give an indication on your chosen names availability; normally you will be looking for a big green tick, if you are not to encounter difficulties.
- Company officers — You must set up ltd company with its officers, this is most important. In its simplest terms, the Shareholders own the company and the Directors run it. Companies House must be notified of any future changes in officers’ information. The minimum requirements are one director and shareholder, these can be the same person. If you do not appoint a Company Secretary the responsibilities will fall on the Director or Directors.
Assuming the officers are people (you must have one human director in a limited company.) and not corporate you will asked to provide the following information for each officer:
- Full Name and Residential address, these will be on public record. You also have the option of providing a service address which will prevent your residential address being displayed at Companies House and beyond. We can provide a service address for you if required. As you purchase a Limited company package from us, we recommend you study the details tabs on the optional upgrades so that you can understand how these may or not affect you. Please remember if you use your home address for Company Formation you should expect it to be shared at Companies House.
- Date of Birth, Occupation, Nationality.
- You will also need to know some unique information to be supplied to create a unique online authentication code, there are several options but if you know these you should be able to proceed. First 3 Letters of; Mothers Maiden Name, Fathers Forename, Eye Colour.
- Capital and Initial Share information — the number, type and value of shares. The minimum capital requirement is 1p, but we recommend at least £ 100.00. Our system will give you default Ordinary shares at a 100 at a £1.00 per shareholder. This is all fully editable.
What Company Setup Documents will be provided upon formation?
Registering a limited company (a company limited by shares) using our online company formation services is a simple process. In 2011, 92% of all company incorporations used online company formation agents. The incorporation package varies depending upon the documents you need to include, but the most basic package should contain:
- Certificate of Incorporation
- Memorandum of association — Contains the names and signatures of the shareholders forming the company; % of shares held in a new Ltd. company
- Articles of association — The Standard Model Articles
So we have set up our LTD Company, what are our duties now?
A Company director must ensure the punctual delivery of Annual accounts, Annual returns and Notices of change. Directors who fail in duties may be prosecuted and are subject to fines; the company could also be struck off the register.
The company secretary is expected to support the director and fulfil other duties as well:
- Maintain registers
- Ensure prompt filing of constitutional forms
- Arrange/give notice of meetings
- File copies of resolutions/agreements
- Distribute a copy of the accounts to members
I’ve Registered My LTD Company, what’s next?
After you register at Companies House as a private limited company, you need to make sure that your UK Company is compliant with the taxation rules imposed by HMRC:
- Notify HMRC of new company incorporation and of the corporation’s tax liability. HMRC will write to you after you have incorporated your Limited company.
- Register for PAYE (as an employer) and VAT
- File a company tax return with HMRC (annually)
- Pay any Corporation Tax due with HMRC
- File audited accounts Companies House (annually) — Companies with a turnover of less than £5.6m can submit an abbreviated version
- File an annual return to Companies House
Setting up Limited Company — Other Things to Consider
Some of our supplementary products which you may choose to purchase after setting up ltd company in addition to your basic company registration are:
- Accounting and Bookkeeping Services
- Business Bank Account
- Company Seal
- Duplication, replacement and reproduction of company documents
- Filing annual Returns/Accounts
- Mail holding and forwarding
- Professional Nominee Services for Company Secretary, director, shareholder
- HMRC Notification (company start up)
- Registered Office
- Share Certificates
- VAT Registration I
FACT: As of June 2012, An average of 38,000 limited companies are registered each month