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Article #281: How To Form a UK Limited Company

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When starting a business, a large number issued to the shareholders in return for
of people go down the route of forming a the appropriate sum of money. Ownership
limited company or, to give it its full of shares gives the shareholders the
title, a limited liability company. right to vote at company meetings and
The alternative for someone starting up entitles them to be paid dividends on
in business on their own is to trade as a their shares based on the profits of the
sole-trader. There is less formal company.
paperwork involved in going into business Any shares which remain unsold are known
as a sole-trader, but a limited company as unallocated shares.
can offer a number of advantages. These It is a good idea to seek advice from an
include greater opportunities to reduce accountant at this point, in order to
the amount of tax your business pays, and make sure that the allocation of shares
increased protection of your personal is done in the most tax efficient way for
assets in the event of the business your own particular circumstances.
running into problems. The final decision to make before forming
This article explains how a limited your limited company involves the
company is structured, and details the company's registered office. Under
steps you need to take to form your own Company Law, all companies are required
limited company. to have a registered office.
The first thing you will need to do is to The registered office of a company is the
decide on a name for your new limited address where official documents can be
company. Companies House maintains a list served and where certain statutory
of all companies registered in the UK, documents relating to the company are
and you can use their website to check if kept and can be made available for
the name you want is available or whether inspection.
it is already in use by another company. Common choices for the registered office
Whatever name you opt for will have to address are either the home address of
have the word "limited" (often one of the directors of the company, or
abbreviated to Ltd) at the end. So if, the office of the company's accountants.
for example, your wanted to call your new Having made all these decisions, you now
business "The Ultimate Widget Company" have all the information you need to form
then the full name of your limited your limited company.
company would be The Ultimate Widget The quickest and cheapest way to form a
Company Limited or The Ultimate Widget company is using one of the many online
Company Ltd. company formation services. For a fee of
Your new company will need at least two around £30 to £50 they will process
people to act as officers of the company. your application with Companies House and
One of these people will be the company send you all the required company
secretary. The other person will be a documents by email for you to print out.
director of the company. If you wish, the For an additional fee, they will normally
company secretary can be a director as provide printed copies of the documents
well, but he/she cannot be the sole if you wish, but for most people this is
director. not considered necessary.
The company secretary has certain legal An alternative to forming the company
responsibilities such as ensuring that from scratch yourself is to buy what is
the company submits annual returns to known as an "off the shelf company".
Companies House and that the company and Off the shelf companies are companies
its directors operate within the law. which have been formed already by a
Many people going into business on their company formation agent, but which have
own choose their spouse or another family not yet traded. You pay a fee to the
member to fulfil the role of company formation agent and they then transfer
secretary. Where two or more people are ownership of the ready-formed company to
forming a limited company, one of them you.
will often take on the job of company Obviously, with an off the shelf company
secretary in addition to being one of the you are restricted on your choice of name
directors of the company. for your company, as you can only pick
An alternative is to use the services of from the list of pre-formed off the shelf
a third party firm who provide company companies that the formation agent has
secretary services to your business in available at that time. However, once you
return for an annual fee. have bought your company you can apply
The next thing to decide is how you will via Companies House to change its name,
allocate shares in your new company. You but there is a fee for this.
will need to specify how many shares your As off the shelf companies tend to work
company has and the value of them. out more expensive and less flexible than
Typically, companies are formed with 100 forming the company yourself, it makes
or 1000 shares with a value of £1 per sense in the majority of cases to form
share. the company yourself using one of the
Some or all of these shares are then online formation services.






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