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Free Guides for new and growing businesses from HRBS - fixed fee accountants and business advisors

How to form a limited company

hrbs.biz guide to forming a limited company How to form a limited companyMany businesses are making the change from being a sole trader to running their business through a limited company to take advantage of the limited liability and also the opportunity for tax planning. The potential tax savings reduced from April 2016 onwards due to the change in the taxation of dividends.

Suppliers and customers often prefer to deal with a limited company as it can imply stability, longevity and also the company’s accounts and details of directors are in the public domain. This makes it easier for credit reference agencies and debt insurance providers to recommend credit limits. Unfortunately your competitors can find out about your company’s performance, ownership and mortgages etc at Companies House for free!

The main difference you will find upon incorporating the business is that you are now an employee of the company. As a result, instead of drawing a “wage” whenever you wanted to, you will now be paid a salary which will be taxable under PAYE. Depending upon your salary the company may need to pay Company National Insurance on your salary. Any money withdrawn in excess of this will be treated as a loan to you and may be taxable as a benefit in kind. I have covered ways to extract profits from your company in a separate article.

Choosing a name

Under company law you cannot have the same or closely similar name to an existing company. It is easy to check whether your ideal name is already taken, just visit the Companies House website here and enter the name you wish to check.

Form the company online

We provide free company formation as part of our start-up company package but if you prefer to set up the company yourself it can be done at Companies House or by using one of the many online company formation agents.

New limited companies can be set up within 24 hours online, it can be relatively straight forward provided you have the necessary information to hand and have considered how you want to arrange the shareholding. The directors are responsible for dealing with Companies House and submitting all the returns, forms and accounts although the tasks can be done by an employee or the company’s accountant.

At HRBS we offer a full company secretarial service which includes dealing with Companies House forms, maintaining the share registers and dealing with dividend documentation (vouchers and directors meeting minutes etc) and this is included in our limited company fixed fees.

If you choose to have a company secretary, you must have their permission as this role has its own legal responsibilities and they must provide personal information when the company is formed.

How many shares?

When you form your limited company you will need to decide upon how many shares are issued and who receives them. Remember that shares represent part ownership of the company, so think carefully about who you give them to. At HRBS, for new small companies, we recommend forming the company with no more than £100 of shares as this capital has to be paid into the company and stays in the company until it is sold or the company buys back its shares.

Shares have a nominal value, usually £1 but can be 1p, 10p etc . The share capital could therefore be 100 shares issued at 1p each i.e. £1 . The 100 shares gives flexibility should you wish to bring in a business partner or give shares to your spouse or civil partner.

What information do you need?

Proposed company name:

For each director:

Full name of director:
Director’s date of birth:
Director’s Passport Number:
Director’s town of birth:
Director’s Full Home address:
Details of any other companies of which they are/have been a director:

Share capital required:

Initial shareholders: name and address
Initial shareholdings: number of shares

(For shareholders owning over 25% of the shares, they must also be registered as a PSC [Person with Significant Control])

Registered Office (home address, accountant’s address or a registered office provider)

The correspondence address for shareholders and directors can be the company’s registered office. Once the company is formed this address will be shown online at Companies House

For ID protection Companies House require 3 of the following for
director, company secretary and initial shareholders:

Town of Birth:
Last three digits of home phone number:
Last three characters of NI number:
Last three digits of passport number:
Mothers maiden name:
Fathers first name:
Eye colour:

If you choose our new company start-up package we will form your company for you.

Ok you have formed the company … what next?

  • You will need to open a company bank account. This can take several weeks. Several banks offer free banking for new companies.
  • You will need to register a PAYE scheme if you will be paying a salary and/or expenses.
  • You may need to register for VAT.
    If you are "Going Limited" i.e. transferring your VAT registered business into a limited company, you will need to register the limited company for VAT and transfer your VAT registration from your sole trader business to the new limited company.
  • You will also need to inform HMRC and the Contributions Agency that you have ceased trading as a sole trader so that your class 2 NIC contributions stop.

We have covered these areas in other free guides here at tips.hrbs.biz .

HRBS can help you

At HRBS we provide a full range of accounting, taxation and VAT services including company formation, all at reasonable fixed fees. Our fee guide is published here on our website. Contact us for a no obligation, fixed fee quote.

[article updated 01 August 2019]

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