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Are you at the stage with your business when it is time to form a limited company? If so, you may wonder about what you do next. For the first time business owner, forming a business into a legal structure can be nerve-racking. However, if you do your research and obtain the right advice and assistance, it can be quick and painless. So, how do you set up a new limited company?

Most people choose a private limited company (Ltd) when they start up a new business. They have ‘members’, individuals or organisations who own shares in the company. The directors run the company and they can choose to have shares or not. These shares cannot be sold publicly, ie on the Stock Market. A private limited company is a separate legal body to the company directors. Therefore, both profits and losses belong to the business itself, meaning the owner has no personal legal responsibility for debts, etc . We have all heard of businesses closing and their owners losing their car, household goods or even their home. The only assets at risk are any investment you have made in the business, and finance you have acquired.  A private limited company will give you peace of mind that your home and possessions are safe. You do, however, risk being disqualified as a future director in another organisation if your business goes bankrupt.

Registering a New Limited Company

-Choose whether to register the business yourself, employ a company formations agent or register online directly with Companies House.

-Decide on your company’s officers. A private company must have its directors and company secretary named in the Articles of Association. Any changes in personnel must be notified to Companies House immediately. Please note that people will be disqualified from being directors if they are under 16 years of age, an undischarged bankrupt or otherwise prohibited from being a company director.

How Do You Set Up A New Limited Company

-Choose a name for your new limited company. All private limited companies must have Limited or Ltd at the end of their name. There are certain words/expressions which must have the consent of the Secretary of State or appropriate government department.  Names must not insinuate connection with either local or central government, nor be offensive in any way. All company names must be unique and you can check your choices free on the Companies House website.

-The documents required to register a new limited company are as follows:

*  Form IN01  –  the company name, registered address, names of directors and company secretary (if applicable). You must also supply any share capital details (if applicable).

* Memorandum of Association  –  the names and signatures of subscribers of the company, nature of business and share commitment of each subscriber (if applicable).

* Articles of Association  –  the rules of operating your company, management and legal responsibility. You can choose the Model Articles, and these are not required to be submitted to Companies House.

Most people these days choose to form their companies through online company formation agencies and they will provide all the documentation you need. Alternatively, all the essential forms can be downloaded from the Companies House website or acquired from accountants or solicitors.

The cost will vary between company formation agents. They usually offer a variety of packages to suit all types of businesses, and they will advise you on the optional extras they offer.

Annual accounts must be filed with Companies House on time, or the company will risk a fine. Accounts must also be audited each year. An annual tax return must be submitted to Her Majesty’s Revenue and Customs, and Corporation Tax must be paid (if applicable).

All directors and members of the company must pay income tax and Class 1 National Insurance Contributions. Limited company profits are usually distributed to shareholders in the form of a dividend.