How to Form a Limited Company in the United Kingdom

Are you unsure whether you're a sole trader or a limited company?

The most significant distinction is that a sole trader has full liability and control over the business, but a limited company's ownership and liabilities are divided into equal shares. Setting up a limited company reduces your personal financial exposure if something goes wrong with the business. Check out our other blog here if you want to start your own business as a sole trader.

The registration for VAT is a procedure that isn't particular to limited enterprises but is quite necessary. You can register voluntarily or when your annual turnover reaches £85,000 (whichever comes first). To learn more about VAT and small enterprises, visit our blog.

Is forming a limited liability company (LLC) correct for you?

A limited company is one of the several forms of businesses that can be established in the United Kingdom.

You must be either "limited by shares" or "limited by guarantee" to declare yourself a limited company.

To be ‘limited by shares,' it means that you make a profit as a company and that the company:

Is legally distinct from those who own it.

Its funds are independent from the owner's personal finances.

Pick a business name

Choosing a company name is an important stage in the process of launching a business. It describes who you are, what your company does, and it is the thing that will either stick in people's minds or be forgotten.

Furthermore, in today's world, coming up with a unique name can be difficult.

You must choose a name that is distinct from that of another registered Accounting firm when forming a limited company. If someone files a complaint or files a lawsuit against your firm, you may have to change your name if it is too close to another company's name or trademark. To emphasise that you are a limited company, your company name must also finish in ‘Limited' or ‘Ltd.'

Read the gov.uk website for further information on naming your company and ensuring you don't have the same or a similar name as another registered company.

Choose your company's directors.

Choosing directors is an important component of forming a registered company in the United Kingdom. The legal role of the board of directors is to ensure that the company functions smoothly and that the company's accounting and reports are accurate and up to date.

• To be a corporation director, you must:

• You must be 16 years old or older and not be barred from being a director.

Directors do not need to live in the UK if the company has a UK registered office address.

Directors must also agree to their name and personal information being published from Companies House, as well as providing a ‘correspondence' address so that anyone wishing or needing to contact them can do so through the Companies House registry.

The director's 'correspondence' address can be deleted off the register if it is their home address.

• You are accountable for the following as a director of a registered company:

• Observing the company's policies

• Keeping track of company information and reporting changes

• Accounts and tax returns for the corporation must be filed.

• If you stand to profit financially from a firm deal, let other shareholders know.

• Corporation tax must be paid.

Determine who will be your stockholders or guarantors.

If your business is ‘Limited by Shares,' you will require shareholders. Shareholders have particular rights, and as a director, you may be able to rely on them to make decisions and agree on changes to the firm.

Ordinary shares are common in most companies, and directors get one vote per share on company decisions and are paid dividends. Check out this gov.uk page to learn more about dividends and how to pay tax on them.

You'll need at least one shareholder if you're forming a limited company. If you're the single shareholder, you own 100 percent of the stock and have complete control over company decisions. A corporation can have as many shareholders as it wants.

When you first register your company, you must supply information such as the number of shares held by the company, their total value, and the names and addresses of all shareholders.

You must also give ‘prescribed particulars' in addition to information on the shares and shareholders. This section must include the following information concerning the rights that each class of share grants to its shareholders:

What percentage of dividends do they receive?

Is it possible for them to sell their shares for cash?

Whether or not they will be able to vote on specific company decisions

How many votes they are allowed to cast

These are those who have voting rights or own 25% or more of a company's stock in most cases. A Person of Significant Control (PSC) is an essential aspect of the business registration process..

Draft an article of incorporation and a statement of association.

Sit tight, because these aren't quite as perplexing as they appear.

A memorandum of association is a legal document signed by all of the company's founding legal owners or guarantors. There is no need to write your own document if you register your company online because it will be generated immediately. If you want to register by mail, you can use this template.

You won't be able to edit anything about this document after it's been registered.

Shareholders, directors, and the company secretary write the articles of association, which are a set of written rules that govern how the company is administered (if you have one). You can either use a template or write your own articles and send them to Companies House when you register your business.

Accountants in Croydon help small businesses and startups with their accounting and taxation matters, to keep their business running smoothly.