Setting up a limited company is really difficult, right? No. This is simply a common misconception held by those who are unfamiliar with the company formation process in the UK. It’s not complex, time consuming or expensive to form a limited company. It’s a very straightforward procedure, it’s incredibly affordable, and it only takes a few hours. All that’s required is a company name, one director and shareholder, a UK address, and an application submitted to Companies House – the UK’s registrar of companies.

In this post, we’ll explain the 3 easy steps required to set up a ready-to-trade company limited by shares.

Company signboard on a wooden post

Step 1 – Companies House or Company Formation Agent

You can register a company directly with Companies House by completing an online or postal application form. Alternatively, you can apply through a verified company formation agency. Whichever route you choose, your application will ultimately be processed and approved by Companies House.

Online registration is the best option. And surprisingly, it’s easier to apply through an agent than directly through Companies House. This is because most of the time-consuming administrative tasks are dealt with by the agent, thus enabling Companies House to process and approve registrations in a more time-efficient manner.

Company formation agents are also popular because their online application forms are really simple, they provide help and guidance, you can purchase company address services during the application stage, and you will receive a full set of incorporation documents when your company is registered.

Step 2 – Choose a company name

The next step is to decide what you want to call your new company. Limited company names must be unique. You can’t choose anything that is identical to the name of an existing company, nor can you choose anything that is very similar to the name of an existing company. However, you can use the name of a dissolved company.

Once you have decided, you should find out immediately if it’s available to register. You can do this online using Companies House website or the free namecheck facility on your agent’s website. Simply enter the name you want to register and the online system will tell you whether it’s available or in use. When you have a name that you can use, you’re ready to start the application process.

Step 3 – Complete an application

During the application stage, you will be required to enter a number of details about your new company and the people who will control it.

Limited company formation application

Company name

Your chosen company name must end with ‘Limited’ or ‘Ltd’, unless you’re setting up a limited by guarantee company that qualifies for exemption. If you fail to add the required ending, your application will be rejected. Be careful not to make any spelling mistakes, otherwise you will have to pay to change the name after registration.

Shareholders and directors

Shareholders are also known as ‘members’. They are the owners of a company limited by shares. Directors are also known as ‘officers’. They are appointed by shareholders to manage the company.

You will need at least one director and one shareholder, but these two positions can be held by the same person. This means you can form the company on your own, or you can set it up with as many other people as you wish.

Directors must be at least 16 years old. You cannot appoint someone as a director if they are a disqualified director or an undischarged bankrupt. There are no such restrictions for shareholders.

You will only have to provide a name and contact address for each shareholder. But for each director, you will have to provide a full name, home address, date of birth, nationality, and a service address (contact address for public record).

Registered office

All companies require an official contact address where they can receive statutory letters from Companies House and HM Revenue and Customs. You can use any address you want, including your home address, but it must be situated in the same UK jurisdiction where your company is registered. There are three such jurisdictions in the UK: England and Wales, Scotland, and Northern Ireland.

Shares

You will need to issue at least one share to set up a company. If there will be more than one shareholder in the company, each person must take at least one share. However, there is no upper limit to the number of shares you can issue. Just be aware – your financial liability for company debts increases with the number of shares you own.

Articles of association

The articles of association is basically a legal document that contains lots of rules and regulations. You must adhere to the contents of the articles at all times when running your business. Most new companies adopt the standard articles from Companies House – this version is referred to as the ‘Model’ articles. If the standard version is insufficient for any reason, you can make amendments and draft your own articles to submit with your application.

Public disclosure of information

The information you provide on the application will be displayed on public record when your company is registered, with the exception of the director’s residential address and the day of his/her DOB. But please be aware: your home address will not remain private if nominated as a registered office or service address.