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Limited Company Formation Step by Step

A Limited company is defined by being ‘a company limited by shares’ or ‘limited by guarantee’, we will look at the limited by shares formation as this is the most popular.

Limited company Formation

A company limited by shares are normally companies that make a profit.
Being limited by shares means that:

  • They are a separate entity from the people that run it.
  • Have shares and shareholders.
  • They have their own finances separate from the directors and shareholders.
  • Can keep any profits made after tax.

Now we know what a company limited by shares is lets take a look at the limited company formation step by step:

Step 1 – Choosing a name the limited company

When choosing a company name you must ensure that the name you choose is not the same as another registered company’s name or as an existing trademark. The name cannot be considered as offensive and must end in’Ltd’ or ‘Limited’.You can use the Companies House register to check the availability of your chosen name. More guidance on company names can be found here.

Step 2- Appointing a Director

A company must have at least one director who is legally responsible for running the company and ensuring all accounts and reports are prepared correctly.

As a director you must:

  • Report any changes within the company and keep company records.
  • Ensure the company accounts and Tax returns are filed.
  • Pay the Corporation tax.
  • Follow the rules of the company outlined in the articles of association.

Step 3- Shareholders and issuing shares

Shareholders are the owners of the limited company, they are entitled to a share of any distributions made from the company’s profit. A company limited by shares must have at least one shareholder, who can also be a director. There is no maximum number of shareholders and the price of an individual share can be of any value, you can choose a low share value (£1 for example) as it is worth remembering that should the company close the shareholders will have to pay for their shares in full.

Step 4- Memorandum and articles of association

The memorandum and articles of association is the document that sets up the company and confirms that the initial shareholders wish to form the company under the Companies Act and as a result agree to become the first members of the company. The articles of association sets out how the company is run, governed and owned. It also sets out the responsibilities and powers of the directors and therefore forms a contract between the shareholders and the company.

Step 5- Registering the limited company

The new company needs to be registered with Companies House, this can be completed yourself or an accountant/registrar can register the company for you. Although this is a fairly simple task many company’s choose to use a third party to register the business for several reasons. Firstly they can feel confident the application has been handled correctly, secondly many accountants/registrars offer the service of Registered office address thus enabling the directors residential address not to be shown on the public record).In order to register with Companies House you will need the chosen company name, 3 pieces of personal information about yourself and the shareholders and either a credit/debit card or Paypal account for the £12 fee. The company will usually be registered within 24 hours.

You can register your new company here.

If you would like further advice on company formation or would like to instruct AJR & Co to act on your behalf contact us for a free 30 minute consultation.