How to register a Limited Company in the UK?

Registering a company is just the first step on the journey to entrepreneurship. There are many challenges that come with starting and running a business, such as developing a product or service, building a customer base, managing finances, and navigating legal and regulatory requirements.

So, if you have a great business idea and are willing to put in the work, this article is perfect for you. 

What is a limited company?

A limited company is a company entity that is either 'limited by shares' or 'limited by guarantee'.

The primary advantage to choose to use a limited liability company is the protection provided by limited liability. This means that if your business accounts encounter financial difficulties, your personal assets will be free from liability. Additionally, increased reputation and tax efficiency are an advantage.

Limited by shares

The most common limited company in the UK is a company limited by shares. Simple definition of ‘Restricted by shares' merely indicates that the owners' liability is limited to the nominal value of the company's shares.

Businesses that are limited by shares are often profitable. 

This entails the following:

• Is legally distinct from the individuals who operate it
• Maintains separate financial accounts from your personal one, this makes accounting and accountancy simple and easy
• Has stockholders and shares
• Free to retain any income earned after paying taxes such as VAT

Limited by guarantee

Section 2(21) of the Companies Act 2013 details Companies limited by guarantee as "a company whose members' liability is limited by the memorandum to the amount that each member may agree to pay to the company's assets in the event of its winding up."

Generally, limited liability companies are 'not for profit'. This entails the following:

• Is legally distinct from the directors and shareholders: Members are free from accounting for the amount borrowed to help in business purposes in the name of the company.
• Has distinct financial obligations from your personal ones: the firm's memorandum of association only makes Members of the company pay the guaranteed amount specified.
• Is backed by guarantors and includes a 'guaranteed sum'
• Profits it earns go back to support the company

How to set up a limited company in the UK?

1. Check if setting up a limited company is right for you

Setting up companies has now gone digital; in that you can do it online now. This makes it very simple and easy for everyone. To set your business is determined by the work you do. It can also affect how you pay taxes e.g. VAT  and obtain funding. If your new business's VAT taxable revenue exceeds £85,00, you must register with HMRC for VAT. All these services can be done online.

1. Choose a name

First, search for your desired new company name to determine whether it is available for registration. You can get help or support from formation agents services. Company names search can now be conducted online due to the digitalization of company documents/records. Company name regulations ban the use of offensive language, and use of ‘sensitive phrases.'

1. Choose directors and a company secretary

You must designate a director, but not a company secretary. A director is accountable for the management of your company. 

1. Decide who the shareholders or guarantors are

At least one shareholder or guarantor, who may also be a director, is required. Determine who has major control PSC over your business: For instance, everyone who has voting rights or owns more than 25% of the company's shares.

1. Prepare documents agreeing how to run your company

A 'memorandum of association' and 'articles of association' must be prepared.

These are the company's foundation documents entailing details of how to run the day-to-day activities and filing them is important. To get these documents is quite easy and simple since Companies House will prepare and attach the memorandum to the articles as part of the company registration procedure.

1. Check what records you’ll need to keep

Possessing a start-up might be invigorating. However, this also implies that you will be liable for some accounting. If you opt to incorporate your new business as a limited company, you will be required to disclose all business revenue, expenses, liabilities, and assets documents and information precisely and on time for accountancy purposes. Additionally, you will be required to provide an annual confirmation statement. This can be made easy through the help of an accountancy firm or accounting software.

1. Register your company in the UK

You'll need to register an official address and select a SIC code for your new company. The time of persons can register for Corporation Tax concurrently with their Companies House registration. If you are unable to do so, you can register with HMRC solely after registering your company with Companies House to complete registration.

What are the benefits of setting up a company limited by guarantee?

1. A company limited by guarantee is a distinct legal entity from its owner/guarantor.

The company is personally liable for its debts. Members will be protected from being held personally accountable for the amount borrowed to support easy running of the company's business.

1. Guarantors are not personally held responsible for any of the company's debts.

As a result, their personal assets are safeguarded. They are solely liable to provide the agreed upon sum pursuant to their guarantee in the case of the company's insolvency.

1. Any person or corporate body can be a guarantor. 

To establish, it requires a single director and a single guarantor. The same individual may have both jobs, which makes it simple for anybody to establish a business. Multiple directors and guarantors, on the other hand, are permitted.

1. Company limited by guarantee is normally set up for non-profit services. 

Profits are reinvested and utilized to promote the company's non-profit initiatives.

1. Company limited by guarantee must include the suffix ‘’limited’’ in its name. 

This term instills a sense of confidence among clients and investors. Utilizing the term 'Limited' or 'Ltd' is simply one of the several company name requirements that must be followed while selecting a company name.

According to section 60 of the Companies Act 2006, limited companies may remove the term 'Limited' or 'Ltd' in certain instances, notably if:

1. The company is either a registered charity or a limited by guarantee corporation (as opposed to a limited by shares corporation); and
2. According to its articles of incorporation, the corporation:

• Fosters or governs trade, the arts, science, education, religion, charitable work, or any other profession;
• Is banned from compensating its shareholders (through dividends, for example); and
• Requires that, in the case of the business's closure, its assets be transferred to another nonprofit organization with identical benevolent objectives.

Conclusion

By incorporating, you take a significant step in transforming your business company into a viable, successful enterprise. To do this, you will undoubtedly have to assume a few legal duties. However, once you've gotten the hang of it, your reporting needs and legal responsibilities as a limited company owner are actually rather simple. 

At the end of the day, incorporating a limited company will provide much-needed security for both you and your business. You'll be less concerned with cash and more focused on going out there and making your new business a success. You can seek formation agent services to make your work easy since they provide packages that make company formation simple. These services are not free.