How do you Create a Limited Company?

Limited company is a popular business structure and with good reason as it presents many benefits for self-employed people, so the question of how to create a limited company is one that many entrepreneurs have asked.

The process to create a limited company is more complex than if you were to set up as a sole trader, but running your own private limited company presents various distinct advantages which is the reason why many entrepreneurs follow this path.

In this post we’ll do a walkthrough of the steps needed to create a limited company and how Gorilla can help you with incorporation and all your limited company accounting needs.

Choose Your Company Name

The name you choose for your limited company is protected by law so no other business can use it. This helps to safeguard your brand and reputation but it can also make it more difficult to find the right name as it must be unique. It must also meet Government guidelines so it can’t include any sensitive words or phrases or trademarked terms. You can use the Government’s Company Name Checker to see if your chosen name is available.

Choose Your Registered Office Address

Your limited company must have a registered company address. This is the address for correspondence to be sent to such as documentation from HMRC. It is worth remembering that details of limited companies, including the registered address, are publicly available.

Therefore if you’d like to protect your privacy and not use your home address, for example, we provide a registered office address service for our clients. This means your business correspondence will be sent directly to your dedicated accountant which saves you time and hassle as you won’t have to forward any correspondence on.

Appoint the Company Directors

A limited company must have 1 or more Directors and they must be appointed as part of the limited company set up process. When you’re self-employed, as a Contractor for example, it’s likely you will be the only Director. As the company Director you have various responsibilities including filing company accounts and tax returns, paying Corporation Tax, following the company’s rules as well as the overall running and management of the business. You can also appoint a Company Secretary but this is not mandatory.

Appoint the Shareholders and Issue Shares

A limited company must also have one or more Shareholders. As a self-employed contractor, you can be the only Director and Shareholder and would own 100% of the business, but there is no limit to the number of Shareholders allowed. A Statement of Capital must be provided which breaks down the number and value of the shares and details of all Shareholders in the business.

Prepare The Required Paperwork

As part of the limited company set up process, various documents need to be completed and submitted to Companies House.

Memorandum of Association

The Memorandum of Association details key information about the company as well as its purpose. This includes the name and registered office of the business, the reason why it was formed (known as the Objects Clause) and the liability of the company Shareholders.

Articles of Association

The Articles of Association sets out the rules relating to how the company will be operated and managed. This includes clarifying the responsibilities of the Director or Directors, the rights of the Shareholders such as dividend entitlement, their voting rights and a framework for Shareholder meetings. Other important elements include the procedure for making decisions in the company and detail relating to any company officers such as a Company Secretary.

Share Certificate

The purpose of a share certificate is to provide evidence of investment by Shareholders in the business. It is a legal document and serves as proof of ownership as well as detailing various information about the shares such as issue date, authorised signatures, a share certificate number and any details about the shares being issued.

Register with Companies House

Once the required documentation is prepared, the limited company can be registered with Companies House. This can either be done online or by post using form IN01. When complete you’ll receive a Certificate of Incorporation which will include the limited company number and formation date.

Confirm Your Standard Industrial Classification (SIC) Code

As part of registering your limited company with Companies House, you will need to confirm a Standard Industrial Classification (SIC) code. The purpose of this is to categorise the limited company based on the nature of the service it provides which helps the Government monitor company formations across different industries and sectors.

You can select between 1 and 4 SIC codes and if you can’t find one that exactly matches your company, it’s fine to choose the one that is the closest match.

Register to Pay Corporation Tax

When you trade through a limited company you must register to pay Corporation Tax on your company profits. This is completed at the same time that you register your business with Companies House.

Get a Business Bank Account

A limited company is a separate legal entity from its owners which means that a dedicated business bank account is a legal requirement for all limited companies, so it’s important to open one before you start trading.

You should look for an account that meets the specific needs of your business and consider factors such as how competitive the interest rate is, what fees (if any) are charged and whether there are any account minimums.

At Gorilla Accounting, we’ve partnered with Mettle, the 100% free business bank account by NatWest. Mettle is designed for contractors, freelancers and small businesses giving self-employed people the financial confidence to turn their passion into opportunity. You can check your eligibility and apply for a Mettle account in minutes here.

Decide Whether to Register for VAT

If your company’s VAT-taxable turnover is below £90,000 VAT registration isn’t mandatory, but you can still register voluntarily. There are advantages and disadvantages either way so check out our VAT Guide to learn more.

Take out Relevant Contractor Insurance

Contractor insurance is a range of insurance policies designed to protect self-employed contractors and freelancers against a range of potential liabilities and also protecting your income should you be unable to work through illness or injury. The cost of the insurance is borne by the limited company rather than the directors and several policies might have to be combined depending on the client and the nature of the business.

Gorilla Accounting has partnered with long-standing industry experts Qdos to provide award-winning contractor insurance. With over 30 years’ experience, Qdos are the go-to insurer for self-employed people. With a proven track record and tailored, flexible contractor insurance solutions, Qdos make insuring your business simple giving you peace of mind that you’re protected against unforeseen circumstances. Click here to get a quote from Qdos today.

Appoint Gorilla Accounting

Once the limited company registration process is complete and your business is trading, it’s important that you fully comply with your legal responsibilities and tax obligations including annual filing of your accounts and returns, completing an annual self-assessment tax return, and paying your Corporation Tax.

As a Gorilla Accounting client, your own dedicated accountant will ensure that all your business and personal accounting needs are expertly handled giving you peace of mind and more time to focus on growing your business.

You’ll receive full access to FreeAgent accounting software, a same day response guaranteed and unlimited support and advice, including how to maximise your tax efficiency, with a guaranteed same day response to your queries.

If you’re a sole trader that’s looking to incorporate, when you’re a Gorilla Accounting client our Company Formation Service will take care of the whole process for you. If you have any queries about creating a limited company or our accounting service, get in touch today on 0330 024 0406 or request a callback from an accountant.

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