How to Set Up a Limited Company in the UK

What is a Limited Company?

A limited company is a business structure that exists as a separate legal entity from its owners. This means the company itself owns its assets, enters contracts, and is liable for its debts — not the individuals behind it.

The "limited" part refers to limited liability. If the company fails, shareholders typically only lose the amount they invested (the value of their shares), not their personal assets like their home or savings.

There are two main types:

• Private company limited by shares (Ltd) — the most common type, used by the vast majority of UK businesses
• Private company limited by guarantee — typically used by charities and non-profits, where members guarantee a nominal amount instead of holding shares

This guide focuses on setting up a private company limited by shares, which is what most people mean when they say "limited company".

Before You Start

Before registering, you need to make a few decisions:

• Company name — what your company will be called
• Directors — who will manage the company (you need at least one)
• Shareholders — who will own the company and how shares are divided
• Registered office address — an official address in England, Wales, Scotland, or Northern Ireland
• SIC codes — codes that describe what your business does

You'll also need to decide whether to use model articles of association (the standard rules provided by the government) or draft your own. For most small businesses, model articles work perfectly well.

Step 1: Choose a Company Name

Your company name must end with "Limited" or "Ltd" (or the Welsh equivalents "Cyfyngedig" or "Cyf" for companies registered in Wales). Beyond that, there are several rules:

Name Restrictions

• Can't be the same as an existing company — check the Companies House register or use our company search
• Can't be offensive — Companies House will reject names considered offensive
• Can't suggest a connection to government — words like "British", "Authority", or "Council" need approval
• Sensitive words need permission — terms like "Bank", "Insurance", "Royal", "University", or "Trust" require approval from the relevant body
• "Too similar" names can be challenged — if your name is too close to an existing company, they can object within 12 months

Practical Tips

• Check if the matching domain name is available — you don't have to use the same name, but it helps
• Keep it simple and easy to spell over the phone
• Check the trade mark register to avoid conflicts
• You can change your company name later, but it involves a special resolution and filing with Companies House

Step 2: Appoint Directors and a Secretary

Every limited company must have at least one director who is a real person (not another company). Directors are responsible for running the company and making sure it meets its legal obligations.

Who Can Be a Director?

• Must be at least 16 years old
• Must not be an undischarged bankrupt (unless the court gives permission)
• Must not be disqualified from acting as a director
• Does not need to be a UK resident, though at least one director must be a natural person

Director Information Required

For each director, you'll need to provide:

• Full name (and any former names used in the last 20 years)
• Date of birth
• Nationality
• Occupation
• Residential address (kept private on the public register — only the "service address" is shown)
• Service address (can be the registered office)

Company Secretary

A company secretary is optional for private limited companies. However, if you appoint one, they can handle administrative duties like filing documents with Companies House. PLCs must have a company secretary.

Step 3: Decide on Shareholders and Share Capital

Shareholders are the owners of the company. When you set up a limited company, you need at least one shareholder (who can also be the director — a single person can fill both roles).

Share Capital

You'll need to decide:

• How many shares to issue — a common starting point is 100 shares at £1 each (£100 total share capital), but there's no minimum
• The value of each share — this is the "nominal value" or "par value"
• Who gets how many — this determines ownership percentages
• Share class — most companies start with ordinary shares, which give equal rights to dividends and voting

Practical Example

If you're setting up a company with a business partner on a 60/40 split, you might issue 100 ordinary shares at £1 each: 60 shares to you, 40 shares to your partner. Your total share capital would be £100, and you'd own 60% of the company.

The share capital doesn't need to reflect the value of the business — it's simply the amount shareholders have agreed to invest. You can issue more shares later.

Step 4: Prepare Your Documents

Two key documents are required to incorporate a company:

Memorandum of Association

This is a simple legal statement signed by all initial shareholders, confirming they wish to form a company and agree to become members. When you register online through Companies House, this is generated automatically — you don't need to draft it yourself.

Articles of Association

These are the rules for running the company. They cover things like:

• How decisions are made
• Directors' powers and responsibilities
• How shares can be transferred
• How dividends are distributed
• What happens if a shareholder wants to leave

Most companies use the model articles provided by the government, which are a standard set of rules suitable for most small businesses. You can adopt them as-is or modify them. If you have multiple shareholders, consider getting a solicitor to draft bespoke articles or a shareholders' agreement to cover scenarios like deadlocks or share sales.

Step 5: Choose a Registered Office Address

Every company must have a registered office address. This is a public address — it appears on the Companies House register and all official correspondence is sent there.

• It must be a physical address in the UK (England, Wales, Scotland, or Northern Ireland — matching where the company is registered)
• It can be your home address, but be aware this will be publicly visible
• Many people use their accountant's address or a registered office service
• PO Boxes are not allowed

The registered office determines which part of the UK the company is registered in. A company with an address in England or Wales is registered at Companies House in Cardiff; Scottish companies at Companies House in Edinburgh.

Step 6: Select SIC Codes

SIC (Standard Industrial Classification) codes describe the nature of your business. You need to choose at least one when registering. You can select up to four.

Some common examples:

You can find the full list on the Companies House SIC code list. Don't worry too much — SIC codes can be updated later when you file your confirmation statement.

Step 7: Register with Companies House

You can register in three ways:

Online (Recommended)

Register through the GOV.UK company registration service. This is the fastest and cheapest option:

• Cost: £100
• Time: Usually within 24 hours (often within a few hours)
• You'll need to verify your identity via GOV.UK One Login and receive a Companies House personal code
• Each director must have their own personal code
• You'll need a Government Gateway user ID for the company (separate from any personal one)
• You can use model articles (no need to upload anything)

Using a Formation Agent

Companies like Companies Made Simple, 1st Formations, or Rapid Formations can register on your behalf. Prices start from around £15–50 and they often bundle extras like a registered office service, business bank account referrals, and bespoke articles. This is a good option if you want a package deal.

By Post

You can send form IN01 to Companies House by post. This costs £124 and takes 8–10 working days. There's rarely a good reason to do this unless you can't register online or need to exclude 'limited' from your company name.

What You'll Receive

Once approved, you'll receive:

• Certificate of Incorporation — confirms the company legally exists
• Company number — a unique 8-digit number (your company's permanent identifier)
• Date of incorporation — the company's "birthday"

What Happens After Incorporation

Setting up the company is just the beginning. Here's what to do next:

Register for Corporation Tax

You must register with HMRC for Corporation Tax within 3 months of starting to trade. HMRC will set up a Corporation Tax account and send you a UTR (Unique Taxpayer Reference).

Register for VAT (If Applicable)

You must register for VAT if your taxable turnover exceeds £90,000 in any 12-month period. You can register voluntarily below this threshold, which can be beneficial if you sell to VAT-registered businesses.

Set Up PAYE

If you'll be paying yourself a salary or employing staff, you need to register as an employer with HMRC and set up PAYE (Pay As You Earn).

Open a Business Bank Account

A limited company must keep its finances separate from personal finances. You'll need a business bank account. Most banks will need your certificate of incorporation and company details.

Get Business Insurance

Depending on your industry, you may need:

• Employers' liability insurance — legally required if you have employees
• Professional indemnity insurance — recommended for service-based businesses
• Public liability insurance — if customers or the public visit your premises

Costs of Setting Up

At minimum, you can set up a limited company for just £100 if you register online, use your home address, and handle your own accounts.

Common Mistakes to Avoid

• Using your home as the registered office without realising it's public — your address will appear on the Companies House register, accessible to anyone
• Not registering for Corporation Tax — this must be done within 3 months of starting business activity, even if you haven't made a profit
• Mixing personal and business finances — this undermines limited liability protection and creates accounting headaches
• Forgetting filing deadlines — late accounts attract automatic penalties (see our filing requirements guide)
• Not keeping proper records — companies must maintain statutory registers (members, directors, PSCs) even if they're small
• Ignoring a shareholders' agreement — if you have multiple shareholders, get one. Model articles alone don't cover disputes, exit scenarios, or deadlocks

Limited Company vs Sole Trader

Not sure a limited company is right for you? Here's a quick comparison:

Generally, a limited company becomes more tax-efficient once profits exceed around £30,000–£40,000 per year, though this depends on individual circumstances. Below that, the extra admin may not be worth it.

Ongoing Obligations

Once your company is up and running, you'll need to stay on top of:

• Annual accounts — file with Companies House within 9 months of your financial year end
• Confirmation statement — file at least once every 12 months (£13 online)
• Corporation Tax return — file with HMRC within 12 months of your accounting period end
• Corporation Tax payment — pay within 9 months and 1 day of your accounting period end
• VAT returns — quarterly, if VAT registered
• Payroll — monthly PAYE reporting if you have employees
• Notify changes — inform Companies House of director, address, or PSC changes within 14 days

Missing these deadlines leads to penalties, potential prosecution, and even compulsory strike-off. Consider using an accountant or company secretary service to stay compliant.