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How to register a limited company

June 28, 2021

In this article, we'll walk you through the process of registering as a limited company and the subsequent changes in how you run your business.

How to register a limited company

To register as a limited company, you will need to register your company details with Companies House to receive a Certificate of Incorporation. You can do this either online or via post.There are six main steps to the process. They are:

How do I start a limited company?

A limited company is a business that has separate liability from its owners and shareholders and must be formally registered with Companies House. The responsibility for shareholders is limited by the value and the number of shares they own, with the amount they invest being their only their only financial ties to the company.Companies House require you to submit a SIC (Standard Industrial Classification) code when registering. A SIC code is a 5-digit code that describes what your company does. There are hundreds of individual codes to choose from. Consult the list provided by Companies House to find the code that best suits your company. This can be up to 4 different codes.

Directors

You will have to choose the company's directors, with at least one company director in a limited company of any size. In the case of smaller companies, the owner can self-appoint themselves so that they have control over the general running of the business.Larger companies will usually have multiple company directors, all of whom require the input of shareholders to decide upon their tasks and responsibilities. Any proposed changes or decisions to the running of the company are voted on.

Shareholders

All limited companies must have at least one shareholder or guarantor. In the beginning, you can appoint yourself as a shareholder and then add more as the company grows.Since 2016, companies are required to register a person with significant control (PSC). They usually own more than 25% of shares and voting rights in the company. All information on the PSCs must be updated whenever there is a change to the list of directors or shareholders to prevent fraudulent activity.

Company name 

Company addresses

When you reach this step, you'll need to provide the following addresses:

Registered or Certified office address, the business's official addressDirector service address, where HMRC can send all correspondence to the directorDirector residential address (this won't be shown on any public records)Registered directors' service addresses from all company directors, shareholders and other people with significant control (PSC)

Incorporation documents

Before the incorporation process is complete, you'll need to prepare a 'memorandum of association' and 'articles of association' agreeing how to run your company.

Memorandum of association

Articles of association

What are articles of association?

Alexa: Articles are the main ‘rule book’ for running a private limited company. All companies are legally required to have Articles when the company is formed. Articles are a public facing document and a copy must be filed with Companies House. Articles are the key constitutional document which governs the internal affairs of your company, regulating a variety of matters including appointment and removal of directors, board composition and size, the decision-making process for directors and shareholders, the issue and transfer of shares, and other administrative matters (like notice requirements).Articles operate as a contract which binds the company and each of its members. In fact, they operate to bind members at incorporation, and any future members who subscribe after incorporation. Along with the shareholders’ agreement (which is a private document that isn’t compulsory), the Articles form the ‘constitution’ and govern the relationship between the company and its members, and the relationship between the members among themselves.There are 3 types of Articles:Model Articles are the default option when setting up a company with multiple shareholders, but only one class of ordinary shares. This ‘off-the-shelf’ option is designed for early-stage companies and is typically adequate when you first set up a private company. Model Articles do come with a handful of limitations; for instance, they make no provision for vesting of founder shares, nor provision for the compulsory transfer of shares in a leaver scenario.  Model Articles with some amendments, which is more of a ‘pick and mix’ option. Many companies adopt the Model Articles with some amendments to better suit their needs. For example, if you wish to give existing shareholders a preemption right on a share transfer, then you’ll need to include this additional requirement to the Model Articles.

How does a new business adopt Articles?

Alexa: Model Articles can be automatically adopted on Companies House when you register your company, unless you decide to adopt amended articles. If you wish to adopt amended articles, then you will need to prepare and file the adopted articles on incorporation. You should seek professional advice before you decide which terms to include in your amended articles. You are free to change the Articles as your company grows and matures. A company can amend its Articles by passing a special resolution, where 75% of voting shareholders agree to the change at a shareholder meeting or by written resolution. The revised copy of the Articles must be sent to Companies House within 15 days of the resolution being passed.

Certificate of Incorporation

Once you've completed the registration process and have been approved by Companies House, you'll receive a Certificate of Incorporation. This is an important legal document confirming that your company was set up properly, and can be used in legal and financial dealings, such as opening a business bank account or applying for a loan.

How much does it cost to register a limited company?

If you choose to go directly through Companies House, you can expect to pay £12 for an online certificate or £40 if registering through via post. The charge can be paid via debit, credit or PayPal. 

Is it worth registering as a limited company?

While registering as a limited company is your decision alone to make, there are a fair few benefits that come with doing so.For businesses that switch from sole trader to limited company, many choose to do so for limited liability. While a sole trader is seen as a singular legal entity with their business, limited companies have a separate legal identity, meaning that if the business comes into financial difficulty neither your nor your shareholders' personal assets will be lost. You only have to lose what you've invested your company.

In the case of a shareholder's passing, retirement or sale of shares, it is far easier to transfer ownership of a limited company than a non-registered company. This can help prevent legal disputes or financial losses.Aside from the financial gains, registering as a limited company means that the company name will be protected by law. This will help preserve and build your brand, without the worry that another company will crop up with the same name.

How are limited companies taxed?

Limited companies are required to pay Corporation Tax, a tax imposed on the income or profit made by a business. At the time of writing, the UK Corporation Tax rate is 19% on a company's taxable profit, which can be calculated by subtracting a company's expenses from its total income.

Are limited companies VAT registered? 

Alternatively, you can voluntarily register your limited company for VAT, even if you fall beneath the threshold amount. Not only can this make your company seem more professional, but you'll also be able to reclaim VAT on any business purchases. After registration for VAT, your limited company can backdate purchases made for goods 4 years prior on the condition you still have the goods purchased, or used your purchase to make new goods that you still own. To reclaim tax, you'll need evidence of these purchases, including receipts, invoices, description and dates of the purchases.