Setting up a limited company with limited knowledge? No worries - we’ll walk you through the key steps involved in setting up a limited company, covering everything from choosing a name to registering with Companies House to getting the right insurance in place.
There are two types of limited company: public and private.
What’s the difference between a private limited company and a public limited company?
A private limited company is usually owned by a small group of shareholders, which may include the founders, a select number of investors, or even close friends and family. These companies are not required to publicly share their financial details or ownership structure and are generally subject to less stringent regulations compared to public limited companies.
A public limited company offers shares that can be easily traded and owned by many investors, including the general public. These companies must comply with rigorous regulations and are required to publicly disclose their financial and governance information. With greater access to capital, they are better positioned for growth and expansion.
Most companies will begin as private, then become public once they grow. This is because a private limited company needs to have share capital with a value of £50,000 to be eligible to go public, and so a period of business growth is usually needed to reach this threshold.
Before you do anything else, your business needs a name. This isn’t just a formality - it's the first piece of marketing you’ll ever do! Choose a name that is:
You’ll need to appoint at least one company director, and a company secretary if you wish. There are a couple of legal requirements governing who can become a company director: you must be at least 16, have no history of bankruptcy, and no prior court order prohibiting you from becoming a company director.
A company director must adhere to the seven duties laid out in the Companies Act 2006. These include exercising independent judgement, exercising reasonable care, and keeping thorough and accurate records.
A limited company must have at least one shareholder, who can also be a company director. If you decide to have more than one shareholder, it’s a good idea to ask a solicitor to help draw up a shareholders’ agreement to lay out how you plan to share profits between salary and dividends. A shareholder with more than 25% of the shares is considered to be a ‘person of significant control’ (PSC).
Before you set up your limited company, there are a few documents you’ll need to get in order beforehand.
Memorandum of Association – A legally binding document that must be signed by all owners, shareholders, and guarantors, confirming their agreement to establish the business. If you plan to register online, you don’t need to create your own Memorandum of Association – this is created automatically as part of your registration.
Articles of Association – Outlines the agreed-upon rules and regulations governing the business, also signed by all owners, shareholders, and guarantors. HMRC has examples of model articles (prescribed by the Companies Act 2006) and more information here.
All limited companies must be registered with Companies House. This process, known as incorporation, can be done in three ways:
1. Online Registration (via Companies House Web Incorporation Service) – The fastest, easiest, and cheapest option. It’s £50, and means your company is usually registered within 24 hours.
2. Paper Application (IN01 form). Postal applications take 8-10 days and cost £71.
3. Using a Formation Agent. This is a third-party service that handles registration for you (pricing and services vary).
After successfully registering, Companies House will send you a Certificate of Incorporation, which is your legal proof of existence.
As the owner of a limited company, you have a lot of responsibility. You’re legally obligated to keep certain records about the company itself, along with accounting and financial records including:
You can find more details of the information you need to keep track of here.
All limited companies must pay Corporation Tax, which is a tax on the company’s profits generated during your accounting period. However, there isn’t a separate registration process - you’ll be automatically registered when you set up your limited company.
HMRC will send a confirmation letter with your Corporation Tax Number (or Unique Taxpayer Reference). Keep this number safe, as it's required for future tax filings and correspondence, including submitting your Corporation Tax Return - a legal obligation for all limited companies, even if the business doesn't make a profit.
You’ll also need to consider IR35 legislation – rules designed to determine employment status for contractors or freelancers working through a limited company for tax purposes. Whether you operate as a contractor – or hire contractors yourself – it’s essential to understand this legislation in order to operate compliantly.
It’s also highly advisable to invest in services and processes to ensure your compliance. Here at Qdos, for example, we offer full working practices reviews, contract reviews, and Tax Liability Cover to mitigate the financial impact should you ever be subject to an HMRC enquiry.
Getting the right insurance is one of the most important ways you can take care of your company, your income, and your employees.
Which insurance packages you choose will likely depend on the kind of work you do. If you work in professional services, you might opt to invest in Professional Indemnity Insurance.
If you often interact with the public or clients, Public Liability is a smart move. Either one of these – or both – might be stipulated in any new contracts you take on.
If you employ anyone, even on a casual basis, you’re legally required to hold Employers Liability Insurance, which protects you in the event that one of your employees suffers an injury or illness while at work.
You might decide to invest in insurance to provide financial support if you suffer an illness or injury at work, such as Personal Accident Insurance or Income Protection Insurance.
Find out more and get a quick quote: Limited Company Insurance
Now that your limited company is officially set up, the real journey begins! From winning clients to managing cash flow, there’s plenty to keep you busy - but with the right foundations in place, you’re set up for success.
Ask away! One of our team will get back to you!
