Limited liability corporations provide protection and add credibility to your business, and are a good foundation for starting a business successfully.
Also known as a or limited company in the United Kingdom are corporations whose liability is limited by shares (Ltd), which is the most common form of privately held company.
A Limited company can be registered in England and Wales, Scotland or Northern Ireland. The registration of companies in the UK is done through Companies House.
Limited liability corporations are separate legal entities that exist under the authority granted by statute. A limited company has substantially all of the legal rights of an individual and is responsible for its own debts. It must also file tax returns and pay taxes on income it derives from its operations.
Typically, the owners or shareholders of Limited liability corporations are protected from the liabilities of the business. However, when a limited company is small, creditors often require personal guarantees of the principal owners before extending credit.
The legal protection afforded the owners of a limited company can be useful. Incorporating a business allows a number of other advantages such as the ease of bringing in additional capital through the sale of share capital, or allowing an individual to sell or transfer their interest in the business. It also provides for business continuity when the original owners choose to retire or sell their shares
A limited company must obtain approval from Companies House to use its proposed name. A limited company must also adopt and file a Memorandum and Articles of Association, which govern its rights and obligations to its shareholders, directors and officers.
Limited liability corporations must file annual tax returns ('corporation' tax returns) with HM Revenue & Customs. It must also file an annual return to Companies House which is a snapshot of general information about a company.
Forming limited liability corporations is a lot easier than you would think!
Here’s our 6 step process to forming a limited company.
There are 3 main routes to limited liability corporations formation, doing it yourself, using an accountant, or using a formation agent.You can create your company yourself by following instructions on the Companies House website, but please remember that some of the legally required documents you’ll need such as share certificates, minutes of your first board meeting and your combined registers will not be included if you choose this route.
Accountants can help you set up your limited company, so if you already have a good relationship with your accountant this might be the route for you. However, accountants’ fees can be prohibitive, so this might not be the best option if you are looking for a quick, cost-effective formation.
The most popular method of forming a company is using a formation agent. There are plenty of companies who specialise in getting your company formed quickly, many operate online and they often have useful tools like a company name checker. Formation agents typically offer a full range of services, from a very basic form-filling service, to a complete package including a range of optional extras. Shop around for a deal that works for your needs and budget. Make sure that you get all the required legal documentation as many of the cheaper options don’t include these items in their standard packages.
A good accountant and formation agent will advise and help you to complete all your documents. They will also ensure that you meet your legal annual filing responsibilities and recommend other services you might want or need for your business such as banking, domain registration and business insurance.
However you decide to form your limited company, it must be registered with Companies House.
When you’re choosing a limited liability corporations name, you are also deciding on a corporate identity for your business.
Working as a consultant I have come across many other businesses that choose to base their company name on their own individual name, which I would be particularly useful if you are already in business and becoming known for your work. However I have been told that it in some lines of work this is frowned upon for instance for contractors seeking to be outside Ir35 I belive that it is best to steer clear of using your own name.
Another approach is to think about what your business is about. What you provide, your product/service features, the benefits to customers, the personality of your company, what key messages you'll be relaying and the core promises you'll be making to customers.
By describing what your company does, it will make it simple for clients to understand the service you provide.
See our business name ideas page for further assistance on finding a name for limited liability corporations.
There are restrictions regarding company names, for example, you can’t use a name too similar to another company or one that intrudes on an established brand. Other than that – be creative! This is your business, so feel free to choose something that reflects your style and way of working.
Once you have a name, it’s worth checking it directly with companies house or a formation agent before you register, and make sure not to order any domains or stationery before the name has been confirmed as registered – just in case there’s a problem.
If you plan to own and run your business alone, sorting out your shares will be surprisingly easy!When you form a limited liability corporations, shares represent ownership of the company, so if you have no plans to share ownership with anyone else, you can simply issue just one share to yourself.
If you do want to have multiple shares in your company, you need to decide how many you want each person involved to have. Shares give you a ‘vote’ within the company, so if you hold 3 shares and your partner holds 2, you can out-vote them on decisions. When you register your company, you will need to have the details for every person you want to have shares, and how many shares you want to allocate to them.
Limited liability corporations are required to have at least one director. Company directors are the people who hold legal responsibility for the company as well as the people who determine company policy.
If you want to keep sole control over your business you can simply register yourself as the company’s only director.You can choose to have multiple directors, and there are only a few restrictions:
• Directors must not be an un-discharged bankrupt
• Directors must not have been disqualified from becoming a director by a court
When you register your company, you will need the names and addresses of each person you would like to be a director.
When you set up your company, you will need to submit a Memorandum of Association and Articles of Association, which tell Companies House all the significant details about your new limited company, such as its name and location, and the roles and rights of directors and shareholders. Most companies use a standard document which allows the business to conduct almost any activity. If you use an accountant or formation agent, they will submit all the documentation for you.
Once your company is formed you will have to keep your company register up to date with Companies House. You can notify Companies House about any changes to your company details such as changes of address or issue of new shares using their simple online Web Filing service.
Filing your Annual Accounts with Companies House is the sole responsibility of the Company’s Directors, and you are required to submit your Annual Accounts and Annual Return yearly.If you are not using an accountant you can file both these documents using the Companies House Web Filing service. Most filing is free of charge but there is a £15 charge to file your annual return.