The UK has worked hard to make starting your own company easy, and this includes incorporating your business as a limited company. Below, we provide a list of 5 items that you’ll need to bring to the party before you begin the company formation process.
What you need to form a limited company
1. A company name
One of the most exciting aspects of company formation is choosing a company name. There are some rules that Companies House imposes regarding what you can name your company:
- Your company name needs to be unique. It can’t be in use by any other registered company, and it must not be deemed too similar to an existing company name. To determine if the name you’d like to use is available or taken, use our company name search tool.
- You aren’t allowed to use offensive words, and you need to be wary of using ‘sensitive’ words. You’re not allowed to suggest any connection to the government or any public authority, nor can you use any words otherwise protected, unless you have express permission from the relevant authority.
- Your company name will be limited to 200 characters and it needs to end with the word “limited” or its abbreviation “LTD”. Some exemptions do exist.
Companies House provides official guidance on company name rules and requirements, which includes the full list of restricted ‘sensitive’ words and expressions. We recommend referring to this guidance before registering a company name.
2. Registered office address
Your company’s registered office address is its legal headquarters; its ‘home’ in the eyes of the law. Every registered company in the UK must have one.
This is the address that will be used for the delivery of all government correspondence with your company, as well as for storing your statutory company registers for inspection. There are several rules surrounding the type of address you can use as a registered office:
- It must be in the jurisdiction in which you incorporate your company (England and Wales, Scotland, or Northern Ireland). Whilst you are free to change your registered office at any point after incorporation, you cannot change the jurisdiction in which your company is registered.
- It must be a physical address
- You cannot use a PO Box number or DX number
It’s important to note that your company’s registered office address will be made publicly available on the central register of companies at Companies House.
3. Service address
All company directors, secretaries, subscribers, People with Significant Control (PSC), and LLP members need to provide a service address when incorporating a company. The service address is the official contact address that HMRC and Companies House uses to contact you in relation to your role in the company.
The following rules apply to a service address:
- It can be anywhere in the UK or overseas
- It must be a physical address
- You cannot use a PO Box number or DX number
- Your service address can be the same as your registered office address
- You are only allowed to use one service address at a time, but you can change your service address at any time
Just like your registered office address, the service address of members will be displayed on the public register.
4. At least one director
To form a limited company, you will need to appoint at least one natural (human) company director. It is his/her responsibility to make decisions on behalf of the company and oversee day-to-day operations. Almost anyone is allowed to be a company director, the only restrictions being:
- You cannot be under the age of 16
- You cannot be an undischarged bankrupt
- You cannot be a disqualified director whose term of disqualification isn’t yet expired
- You cannot be the auditor of the company
Directors aren’t fixed appointments. New ones can be appointed and old ones can be removed as necessary after incorporation, in accordance with the company’s articles of association.
5. At least one member
You will need at least one member (shareholder or guarantor, depending on what type of company you form). Members are the people who own a company.
The vast majority of companies are private companies limited by shares, whose purpose is to make a profit and distribute it to the owners or shareholders.
Where the company is to be limited by guarantee, the members agree to ‘guarantee’ a certain amount of money to pay into the company if it ever experiences financial difficulty.
The director and shareholder can be the same person, so if you are forming a company on your own, you can name yourself for both positions.
The five items mentioned above are the things you need to get the company formation process started. There are of course other matters to consider when incorporating a company, but these are supplied to you by your company formation agent as part of their online registration service.
Standard Industrial Classification (SIC) code – A SIC code identifies the sort of business your company will undertake and is used for information purposes by a number of third parties including government agencies. Your company needs to submit at least one of these codes on incorporation. Quality Company Formations (and other formation agents) supply a SIC code finder, making it easy for you to choose the required SIC code or codes.
Memorandum and Articles of Association – These two documents make up the foundation of your company’s constitution and they are required upon incorporation.
The Memorandum is a declaration by the company’s first shareholder or shareholders agreeing to form a company. The Articles of Association outlines the basic rules and governance of the company (such as how decisions are to be made and what powers are granted to the directors).
Under the Companies Act 2006, companies can use the ‘Model Articles’ which is a basic set of articles you can use if you do not have or wish to create your own.
After incorporation, the Memorandum becomes a historical document and can never be changed, but your Articles can be amended with the agreement of the shareholders.
Company type – A company limited by shares is the most common type in the UK and the go-to choice for most businesses. However, when you reach the incorporation stage, you may find it appropriate to form a different type of company.
Examples of other company types include limited by guarantee (often used by non-profit organisations), limited liability partnership (LLP), and public limited company (PLC). You cannot change a company type following incorporation.
Persons of Significant Control (PSC) Register – Almost all companies registered in the UK are required to record all People with Significant Control on incorporation. Thereafter, these details must be entered and kept up to date in the PSC register, which records every individual and relevant corporate entity who has control over the company.
Why choose company formation?
Company formation is the process of registering a business as a limited company through Companies House. Companies House is the official registrar of companies for the UK.
By forming (or ‘incorporating’) a limited company, you will be turning your new business into an independent entity in the eyes of the law. This means that your company officially transforms into an independent legal ‘person’, which is crucial for protecting your own personal financial wellbeing,
If your business turns out to be an unsuccessful venture, a limited company structure creates an important separation between your own finances, assets, and contracts and those of the business. As the owner of your new limited company, you can only be held financially liable, in almost every circumstance, for the amount up to the nominal value of the shares you have in that company.
This is called ‘limited liability.’
Whilst there are several different types of limited companies in the UK, most private limited companies are limited by shares. This means that ownership of the company is divided between a predefined number of shares. However, more shares can be added or taken away at a later point, provided the appropriate authorisation is given by the shareholders or directors, in accordance with the company’s articles.
Just to be clear: it is not a legal requirement to form a limited company in the UK. You are free to do business as a sole trader, but if you choose this route, any finances or assets you own will be considered fair game in the eyes of the law, if your business goes under.
That’s why so many business owners choose to play it safe by forming a limited company – and because the process of forming a company is so fast and affordable, it’s an easy decision for most individuals to make.
Quality Company Formations provides a range of company formation packages, including several different types of company structure, to suit most requirements. Check out our company formation packages for options and prices.