How to set up a private limited company?

What is a limited company?

A limited company refers to the business structure, whereas the financial and legal entity is different from the person or owner of the business. Setting up a private limited company will provide limited liability to the business. Therefore, when the business incurs any loss or fails, you will be liable only for the face value that is your share in the company.

The limited company is different from its board of directors. Thus, the private limited company has bank accounts, which is different from the board of directors. The company is liable for paying tax and can be sold or bought depending on the shares. However, the private limited company must be registered at the Companies House.

What are the benefits of setting up a private limited company?

While it can be quite beneficial to run your business as a sole trader, can be beneficial setting up a private limited company can be more helpful. As a sole trader, you get to know how well your business performs. However, it has drawbacks, such as paying business debts or even corporate taxes.

Limited liability is one of the most significant advantages of setting up a limited company. Since it is a separate legal entity, there will be no risk of losing your money if the company shuts down. If the company is under loss or shut down, you will be liable for paying only the face value or share you have in the company.

When you set up a private limited company online, you have a different financial aspect of managing. This is quite different from your finances. As a result, you may need help as a sole trader. The disadvantages you gave as the sole trader will not apply when you have a limited company. One of the biggest benefits of having a private limited company is even if anything negative happens to your business, all your assets won't be in danger. Apart from that, you will have to pay low taxes on the profit as a private limited company.

How to set up a limited company?

Once you plan to switch from sole trader to private limited company, you must be aware of the process. You will need to connect with different professionals who will make it easier for you to set up the business.

The process of setting up a limited company is quite simple. Below are the steps to form a company:

Know what is right for you

When setting up a private limited company, you must understand what is right for you. Since there are different business structures, you must choose one that suits you the best. It is advisable to understand the benefits and drawbacks of every business structure to make the right choice.

Decide your company name

No matter what type of company you decide to set up, choose the name. The name should be unique and not something that already exists. Furthermore, the name must not portray any false implications. There are specific rules you must follow.

Get a director

A director is one of the essential requirements of a business. While one director is the minimum, the private limited company has more than one. The Directors hold power to decide for the company and keep a check on the operations.

Apart from a Director, many business owners also consider hiring a Company Secretary. The Company Secretary will look after the directors' orders and ensure they are followed. They will check the structure of the company and administration duties.

Choose the shareholders

The shareholders are a vital part of any business. The shares are initially divided among the directors. Any shareholder with more than 25% shares is known as the Person of Significant control.

Submit all the documents

You must submit all the documents appropriately. With the appropriate documents, it will be easier for you to stop the private limited company in the UK. Given below are the documents that you need to submit, including;

• Memorandum of Association- Legal statement signed by all the responsible bodies or shareholders of the organisation.
• Articles of Association- This will discuss how the company will run and discuss the legal rules the company secretary, directors, and shareholders will need to follow.

Keep records

Records are one of the most important aspects of any business. Therefore, when setting up a private limited company in the UK, it is advisable to maintain all the records. Consequently, you must keep a record of the accounting. In case the government requests, you will need to submit these records.

Register your company with the companies house

Make sure to register your company with Companies House, or the UK government will not consider it. You can either register the company online or post the form IN01. Usually, the company is registered with Companies House within a timeline of 24 hours when you do it online. The complete procedure will take up to 10 days if you register the company with postal registration.

Once the company is registered, you will receive the ten-digit Unique Taxpayer Reference on the company address. It is advisable to keep the UTR safe in case of emergencies. Apart from this, you will also receive the Certificate of Incorporation confirming the company's legal existence. This document contains information such as the date of formation and company number.

For online registration, the process would cost £12. However, for postal registration, the process would cost £40. If you want same-day postal registration, the process will take £30.

Conclusion

Make sure to submit all the necessary documents to the respective authorities for UK company formation. This is done to ensure that the company can pay taxes. It is also crucial to provide the right information regarding the shareholders.