Limited Company Creation

At various points in the growth of a small business, it’s only natural that the owners will consider setting up a limited company. Whether or not it’s the right time to do that for your business is a complex question, and we’d always recommend speaking to trusted business accountants before making the decision. Today, we’d like to look at how you do it when the decision is made.

Over many years serving small businesses across Lancaster and Morecambe, we’ve spoken to countless business owners and entrepreneurs who had picked up the impression that limited company formation is a difficult, time-consuming process. The truth is far from that – but there are still a few things you need to get right.

What’s Required for a Private Limited Company?

The best way to think about this is that your limited company is a new entity, one which carries liability for its own problems. As such, most of the things you need are ways to confirm an identity.

A limited company needs:

• At least one director
• At least one shareholder
• An address
• A name
• A division of shares, and a record of that distribution (Yes, even if one shareholder has 100% of shares)
• An SIC Code
• A Memorandum and Articles of Association
• Details for any Persons with Significant Control over the company

Let’s look at the more confusing of these in detail.

What’s an SIC Code?

To give it its full name, the Standard Industrial Classification code identifies the area the business is active in. Companies House maintains an active list to make this easier, which you can find here.

What are the Memorandum and Articles of Association?

These documents are an agreement between the initial shareholders to create the company and a set of written rules under which that company will operate. The government has a pro-forma for the memorandum of association here and model articles of association here.

What Constitutes Significant Control?

A person is considered to have significant control over a private limited company if they have voting rights, own over 25% of company shares, or both.

What Rules Govern Company Names?

You can’t give your company the same name that another registered company is using. Check the Companies House register to find out if your chosen name has been taken.

Additionally, if your incorporated name is too similar to that of a previously existing company, they can complain and you will need to change your name.

Lastly, your name should end in either Limited or Ltd.

What Restrictions Are There on Company Addresses?

Your company address must be a physical address with a postcode. That address must be in the same country as listed on the company registration (for our readers, this will be England).

If you have no official business premises, the home address of a director or of the person who manages your Corporation Tax can be used. (It should go without saying, but check they’re willing to!)

What Restrictions Are There on Company Directors?

All directors must be legally adults, so they must be at least 16 years old. They must not have been disqualified from being a company director before.

The Registration Process

Once you have everything on the checklist and you’ve confirmed nothing you’ve chosen violates any of the restrictions, you can register your company online.

At this point, ID and right to work checks will be conducted as per Companies House rules. These are an important check in the government’s anti-money laundering (AML) regulations.

After registration is complete, you’ll receive a certificate of incorporation. This will give you a record of your company number and date of formation, as well as confirming the company legally exists.

Company formation has been made relatively straightforward; however, as it ties closely into financial reporting, it can still be daunting. That’s one reason for the role of company secretary, and we act in that capacity for many local limited companies.

If you’d like to discuss the right time to make the jump, the structure that should be put in place, etc., please contact us directly. We’ll be happy to help.