How to set up a limited company in the UK?

What Is a Limited Company?

Regardless of the number of individuals who own the company, even if it is just one individual or more than 10 people, the limited company is still a separate legal entity, even though there is only one person as its only shareholder and director.

In other words, the limited company can enter into contracts in its own right, and to be held liable on its own. Unless directors or shareholders have agreed to give personal guarantees in the case of a lawsuit, their assets may not be sold to pay a debt, in the event the limited company is sued.

Who Can Set Up a Limited Company In The Uk?

Limited companies in the UK can be owned and managed by anyone who meets the minimum age requirement of 16. There is no requirement that the directors, shareholders, or the secretary must reside in the UK. 

Requirements to Set Up a Limited Company in the UK

Here are some of the key requirements you may need to know if you want to set up a limited company in the UK:

• The limited company must have a minimum of one director.
• There is a minimum age requirement of 16 for all directors. And a natural person must also be appointed as a director.
• The business company needs to have a registered office in the UK.
•  The company name should not be too close or an exact duplicate of any other company name already registered. 
• Corporation Tax (CT) and Value Added Tax (VAT) are both business taxes that limited companies are required to register for and pay to HMRC.

You can form a limited company without having any necessary qualifications. Anyone with money and the time to complete the necessary application forms online or at the Companies House can register a new business. If you go directly to Companies House, you will pay a filing fee of £12 to set up a limited company. It can cost as little as £9.99 online through an E-formation bundle if you register through an approved agent of Companies House. When you register a new business or offer a service, limited company insurance is a valuable tool to help protect your bank account.

Advantages and Disadvantages

One of the biggest benefits of creating a limited company is the protection of your liability. You will be protected from losing your assets if your company runs into trouble because limited companies are considered separate legal entities and possess the status of a legal person self-acting

There are many types of limited companies in the UK, and for companies of all sizes and types. Many people use them and they are among the most preferred legal frameworks. 

Advantages

Limited liability, tax efficiency, and professional status are some of the principal advantages of trading as a limited company. However, there are many other advantages associated with limited companies. Here are some of them:

• Reducing individual liability: A shareholder will be free from legal obligations to pay more than the nominal value of his share. The nominal value of your unpaid shares will be what you will be required to make in the event your company becomes insolvent and cannot pay its creditors.
• Planning and efficiency in taxation: A limited company in the UK pays only 19% Tax on profits, while a sole trader pays between 20 and 45% income tax. As a result, tax planning is more flexible.
• Trust and credibility: Your new business or the service you provide will gain valuable prestige, important credibility, and reputation by adopting a limited company structure.
• Dividing your income: You can give shares to your spouse or other family members when you operate a limited liability corporation. As a result, you can divide your profits and reduce your VAT or tax obligations.
• Protection of the company's name: All companies' names have to be completely different. As a result, it is not allowed to start and register more than one business or limited company under the same name or even a name that is substantially similar to another.

Disadvantages

As is to be expected from something that offers so many advantages, limited companies also have a few disadvantages worth highlighting. We’ve outlined them below:

• Company names are restricted in certain ways.
• Bankrupted or disqualified directors are ineligible to register a limited company.
• Information relating to individuals, the limited company, business or service will be made publicly available.
• To assist you with tax matters, you might need to hire an accountant. An accountant is a good hire at all stages of a limited company's settings and development. From the new business planning to company formation, loan documents applications to government annual audits, preparing business accounts, an accountant makes life easier at every step.
• Money withdrawals from the limited company must adhere to tight processes.
• Accounting regulations are becoming increasingly complex and long every year.
• The limited company records and registers must be kept up to date and made accessible to the public at the registered office.
• If you modify information about your limited company, business or service in any way, you must inform Companies House right away.