Considerations should be given before taking the leap and establishing your company as a limited-company.
There could be many reasons for you to decide to form a limited company, with one major benefit being it ensures personal assets stay separate from company finances – making limited companies much safer than sole traders who must assume personal liability for all aspects of their activities.
No matter the reason for establishing a limited company, it is imperative to abide by your obligations under the Companies Act when taking this step. This law dictates how businesses with limited liability must operate.
Our basic guide offers insight into how you can properly incorporate a limited company, starting from choosing its name to filing legal paperwork.
Deciding on a company name
Before providing Companies House with any incorporation documents, it is necessary to confirm that your chosen name for business is already being used by others.
Finding an appropriate name to represent your business can be more complex than anticipated. Depending on the industry or other aspects involved, you may need to narrow down a long list of names before finding one that speaks to you – one which hasn’t already been taken by another business or hasn’t already been used by someone else.
There are also other considerations when selecting your name:
- Your company name must include limited, Ltd, public limited company (PLC), or plc at the end of its name.
- Name should not be offensive
- Your name must not contain any sensitive words or phrases without receiving prior approval to do so.
Incorporating a limited company
Apply for your limited company online or with traditional paper forms; one advantage of applying online is reduced room for error. Costs associated with each method differ, so make sure you review current rates as they could change at any time.
Forming an LLC requires three essential documents. Business directors often enlist an intermediary’s services to prepare these documents on their behalf; however, this isn’t required under law. These include:
Form IN01
When filling out this document, it will be necessary to indicate your Registered Office location within the UK as well as details for Secretary, Director(s), subscribers and capital of shares if applicable.
Memorandum of Association
This list should include signatures and names of those interested in joining your company. In addition, if your business is limited by shares, members should agree to purchase at least one share each.
Articles of Association
Your Articles of Association provide the rules that regulate how your business will operate, with coverage including meeting procedures and shareholder rights as well as how dividends will be dispersed and other necessary details.
Your obligations
After setting up your limited business, there will be certain requirements which need to be fulfilled regularly as an operating limited company. Here is an outline of these responsibilities you’ll have as an LLC:
Any employee employed by the company must pay both income tax and national insurance contributions.
Companies House requires annual accounts to be filed. An Annual Reference Date (ARD) should be set as soon as you incorporate. You should file them within nine months from this date.
Companies House requires annual reports to be filed. This document offers a quick snapshot of key details regarding your registered office, directors and secretary as well as share capital.
Companies are required to file an annual HMRC Corporation Tax return within nine months after the end of each company year, with tax due on any taxable earnings due for tax. In the UK, Corporation Tax will apply on all tax-deductible profits that came from outside its borders.
Business Insurance
There are generally three primary forms of business insurance coverage, namely public liability and employers’ liability policies as well as Professional indemnity coverage. Your choice will ultimately depend on the unique needs and circumstances of your company.
Legal payouts could run into the thousands; therefore it is crucial that you evaluate all available options and assess if your company is equipped.
Public liability insurance
For businesses that regularly interact with clients and customers, public liability insurance may be worth considering as it can protect against compensation payments for citizens should your activities cause harm or property damage. While not required by law, such policies provide protection from lawsuits should something unexpected occur which causes harm to someone.