How to Form a Limited Company

If you’re considering starting a business in the UK, you’re not alone.

The UK is in many ways a brilliant place to start a business and you’ll be joining many other household name companies that decided to form a limited company in the UK.

Companies House is the UK’s ‘registrar of companies’. You can’t legally form a limited company in the UK without the involvement of Companies House, so you’ll need to deal with them at some point. The below guide will help you learn how to form a limited company and the important considerations to take during the process.

Why Form a Limited Company?

Limited companies are in many ways different from the perhaps more familiar sole trader setup. It might be more tax-efficient to form a limited company (though you should speak to a decent tax advisor to make sure of this) and you can also reduce your liability. There’s also the credibility factor, with limited companies sometimes being seen as safer choices than sole traders. It’s quite possible that you’d earn contracts or work through being a limited company that you wouldn’t be offered as a sole trader.

What Are the Different Types of Limited Company?

In this article, we’ll look at the three main types of limited company recognised in the UK:

Private company limited by shares

Most UK limited companies are set up as private companies limited by shares.

As explained by the gov.uk website, “most limited companies are ‘limited by shares’. This means they’re owned by shareholders, who have certain rights. For example, directors may need shareholders to vote and agree changes to the company.” One limitation of a private company limited by shares is that the shares cannot be listed on a stock exchange. If you want your company listed on a stock exchange, you’ll normally have to convert your private company limited by shares to a public limited company.

Public limited company

As hinted at above, one of the major differences between a private company limited by shares and a public limited company is the ability to list shares on a stock exchange. However, there are some requirements that you have to meet before you can convert your private company limited by shares into a public limited company. One of the key requirements of a public limited company, as explained by hjsolicitors.co.uk, is that “It must have issued share capital of at least £50,000 (or the proscribed Euro equivalent). At least 25% of the nominal value of its shares and the whole of any share premium must be paid up on registration.”

Private company limited by guarantee

As an alternative option, often used by charities and other not-for-profit organisations, is the private company limited by guarantee. Rather than shareholders, a private company limited by guarantee will have members who guarantee to pay the company’s bills should the company be unable to do so (as laid out in the company’s articles of association).

Advantages and Disadvantages of Forming a Limited Company

We’ve listed a few of the key advantages to forming a limited company below:

• Limited liability for the owners is a key advantage. This means that the owners will have some personal protection should the business fail.
• There’s a credibility boost, which could help you earn customers and clients.
• Youfledgeling might be able to achieve greater tax efficiency with a private limited company.
• It might be easier to qualify for loans or funding, though this will be dependent on the specific circumstances of your business.
• You can easily transfer ownership of the business, or add additional owners as needed, through the transfer of shares.

It’s also important to be aware of some of the potential disadvantages.

• Private limited companies are regulated, with specific reporting and filing requirements.
• It can become more complex to manage your accounts and your tax liability.
• This might mean higher running costs, as you’ll often want to employ administrators, accountants and tax specialists to manage all or part of your affairs.
• Some important information will be made available to the public, via a public registry, such as the names of directors.
• Shareholders gain certain rights and they might not always agree with directors on the best course of action for the company.

How to Form a Limited Company

The steps of forming a limited company are similar for every business.

1. Decide on a name for your company.
2. Collect any information that you’ll need for the process.
3. Create any required documentation, such as a memorandum and any articles of association.
4. Get in touch with Companies House.
5. If successful, you’ll need to wait for a certificate of incorporation from Companies House.
6. Run a board meeting and keep a record of items discussed as required.
7. Statutory registers should be established, as required for the company
8. Shareholders should be issued with share certificates in the case of a private company limited by shares. If you’re running a company limited by guarantee, instead you’ll issue membership certificates.

Companies House can and does reject company formation applications from time to time. To give yourself the best possible chance of success, you can use a company formation agent, such as Mint Formations , who are very familiar with the application process and understand how it all works.

To Form With Companies House or a Formation Agent?

If all company formation requests need to go through Companies House why not go directly with them?

Good question.

Of course, many companies can and do liaise directly with Companies House. But some people find the process difficult, time-consuming and complex. If you’d like to get your business started quickly and with minimal use of your own time, it can make sense to use a company formation agent such as Mint Formations. There’s an additional fee, but this allows you to spend your valuable time on the things that are most important to your fledgeling business.

Ready to Form Your Limited Company?

At Mint Formations, we help you form your limited company and take away all the stress that comes with starting your own business. We offer standard and bespoke packages to meet your needs and can help through every step of the process to get your home business up and running.

Are you ready to start your limited company ? We’ll secure your business name and get your company registered fast so you can start doing what you love from home.

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