Forming a Limited Company
So you’ve decided to start forming a limited company?
The big question is, where do you begin?
Thankfully the process of forming a limited company is very straightforward, more so than most people think.
Perhaps the best news though is that it is something you can do yourself, in just a few minutes, and it can cost you less than £20!
Its a common misconception that you need to ask your accountant to form a limited company for you. Whilst they will offer this service, it will usually come at a cost of between £50 and £250. There is no reason for you to go down this route since this page contains all the information you need to apply for your limited company in under 10 minutes.
Step 1: Choose Your Company Name
Often the most difficult step, choosing the right name for your company is something that can easily drag on for hours, if not days or weeks! Ideally you want the name to be memorable, convey the right message to your customers and perhaps be related to the market you are entering.
However, what you need to remember is that it is only the official name of your company and does not dictate that have to use that as your brand name when approach customers (as you can always be ABC Ltd ‘trading as’ XYZ).
Because of this, your chosen company name is perhaps not as important as you may have thought and so do not spend too much time debating which name is best. It is far better to just get the business registered and start trading than to delay launching simply because you cannot decide on the right name!
Of course you will need to check whether your desired company name is available which you can do on the Companies House website.
Step 2: Appointing Directors & Allocating Shares
If you are starting the business alone then this will be a simple procedure.
Since all limited companies are required to have at least one director and one shareholder then you will be listed as both (unless you wish to appoint another company as a shareholder).
If you are starting the business with other partners then you will need to decide who will be listed as directors in the business and who will be listed as shareholders.
The difference between directors and shareholders is that a director has a direct say in the business but not necessarily a share of the profits whereas a shareholder has a share of the profits but not necessarily a say in how the business is ran. Often the same individuals will be both directors and shareholders since it is possible to have multiple roles.
As far as shareholders go, the hardest part is usually deciding how much of the business each individual will own. If one person is investing more money than the others then naturally they will have a bigger share, however the exact levels are something you need to work out between you.
In terms of the numbers of shares issued that number can be as low as 1 share and as high as you wish! Often companies are setup with only 1 share issued to each shareholder. This works fine but it may suit you better to issue 100 shares since that can easily be divided up between shareholders (now or in the future) in to clear percentages.
The value of the shares issued should reflect the initial capital investment. Most commonly this is set at £1 per share so that a small initial investment can be made and then topped up later.
Whilst you can choose to also appoint a company secretary, this is no longer required.
Step 3: Completing The Application Form
Once you have decided on the name and structure for your new business you just need to complete the application form and pay the small charge (currently under £20).
You will of course need a few details to hand such as:
- Your desired company name
- The address of your registered office
- The number and value of shares issued
- Details of all directors and shareholders (name, address, date of birth, etc)
But overall the form is pretty simple to follow and you can either use the Companies House direct filing form, or you can use a registered agent who usually offer far simpler and user-friendly forms than Companies House and can also provide a range of extra services.
As an example, SetUpaCompany are a formation agent approved by Companies House and their cheapest package is only £19.99.
This includes all registration fees as well as a free domain name and email address and even a company bank account (if required). You can view our SetUpaCompany review for more information.
Once the form has been submitted it can take anything up to a couple of days to complete (although most are formed within a few hours). Once accepted you will receive a registration certificate that includes your registered company number and you can begin trading!