Setting up a limited company can be an exciting step for entrepreneurs and business owners.
A limited company is a legal entity that offers many advantages, such as limited liability and potential tax benefits. In the UK, limited companies much be incorporated at Companies House and also have their own company registration number – you’ll find that they’ll have ‘Ltd.’ or ‘Limited’ at the end of the company’s name.
Read on to find out what a limited company is and how to set one up…
Understanding a Limited Company
A limited company is a separate legal entity from its owners, also known as shareholders. It offers limited liability protection, which means that the personal assets of the shareholders are not at risk in case of business debts or legal issues.
The company's finances and obligations are separate from those of its shareholders, allowing for better risk management. This is a huge advantage to starting a limited company as it has its own ‘legal personality meaning it can enter into contracts in its own name, keep money from sales, responsible for its own actions.
Choosing a Company Name and Structure
The first step in setting up a limited company is choosing a suitable name. It's essential to select a unique and memorable name that aligns with your business goals. Keep SEO in mind, and dedicate some research time to developing a name that will be successful depending on the industry that you’re interested in.
Next, you need to decide on the company structure, such as a private limited company (Ltd) or a public limited company (PLC). The most common structure for small businesses is a private limited company.
Registering the Company
To set up a limited company, you must register it with the relevant authorities. You will need to provide information about the company's directors, shareholders, registered office address, and share capital.
It’s important to consult a legal professional if you feel unclear about how to do this, as it’s a very important step in the process. Click here for more information from GOV.UK on setting up a limited company.
Appointing Directors and Shareholders
A limited company must have at least one director who is responsible for managing the company's affairs. The director(s) can also be a shareholder. Shareholders are the owners of the company and hold shares that represent their ownership. They are entitled to profits, dividends, and voting rights.
The director(s) and shareholders can be the same individuals or different parties. Directors are responsible for following the company’s rules and keeping a record of changes and reports within the business – this also includes filing accounts, tax returns and paying Corporation Tax, if applicable.
Fulfilling Legal and Compliance Requirements
Once your limited company is set up, you have certain legal and compliance obligations to fulfill. This includes maintaining accurate financial records, filing annual accounts and tax returns, and complying with relevant laws and regulations. It's essential to understand the ongoing responsibilities and seek professional advice to ensure you meet all legal requirements.
Setting up a limited company can provide numerous benefits, such as limited liability and increased credibility. By following the steps outlined in this blog, you can establish a limited company successfully.
Remember to consult with legal and financial professionals to ensure compliance with all legal requirements and make informed decisions for your business's future success.
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