How do I form a Private Limited company?

Taken from the Government Gateway website – www.gov.uk

1. Overview

You can set up a private limited company to run your business.

All limited companies must be registered (‘incorporated’) with Companies House. To do this you need:

• a company name – there are rules on what it can and can’t include
• an address for the company
• at least one director
• at least one shareholder
• the agreement of all initial shareholders (‘subscribers’) to create the company – known as a ‘memorandum of association’
• details of the company’s shares and the rights attached to them – known as a ‘statement of capital’
• written rules about how the company is run – known as ‘articles of association’

Once the company is registered you’ll get a ‘Certificate of Incorporation’. This confirms the company legally exists and shows the company number and date of formation.

Types of private limited company

The liability for debts in a limited company is usually limited to the shareholders. Exactly what liability you have depends on the type of limited company you create.

Limited by shares

A private company limited by shares is owned by its members (called shareholders). Each member’s liable for the original value of the shares they were issued but didn’t pay for.

Example A shareholder has 500 shares originally valued at £1 each. They have previously paid for 100 shares, ie £100. At the time the company fails, they’re liable up to the original value of shares they haven’t paid for, ie £400.

2. Register your company

You can register your company:

• online – as long as the company is limited by shares and uses standard (known as ‘model’) articles of association
• by post using form IN01
• using an agent
• using third-party software

If your company’s based overseas, read the guide on registering an overseas company or contact UK Trade and Investment (UKTI) for advice.

Fees and how long it takes

Online applications are usually registered within 24 hours and cost £15 (paid by debit or credit card or Paypal).

Postal applications take 8 to 10 days and cost £40 (paid by cheque made out to ‘Companies House’).

There’s a same day service costing £100. You must get your application to Companies House by 3pm. Your envelope (and any courier’s envelope) must be marked ‘same day service’ in the top left-hand corner.

Where to send your form

Send paper applications to the address on the form.

aren’t called shareholders.

3. Company address

Your registered office address is where official communications will be sent, eg letters from Companies House and HM Revenue and Customs (HMRC).

The address must be:

• a physical address
• in the same country that your company is registered in, eg a company registered in Scotland must have a registered address in Scotland

You can use a PO Box but must include a physical address and postcode after the PO Box number.

You can use your home address or the address of the person who will manage your Corporation Tax if these addresses meet the rules above.

Your company address will be publicly available on the register.

4. Appoint directors and company secretaries

Your company must have at least one director.

A director must be 16 or over and not be disqualified from being a director.

Another company can be a director, but at least one of your company’s directors must be a person.

A director is legally responsible for running the company and making sure company accounts and reports are done properly.

Directors’ names and addresses are publicly available from Companies House. You can stop your address from appearing on the register if you or your family are at risk of abuse or harm because of your company’s work.

Company secretaries

You don’t need a company secretary for a private limited company. Some companies use them to take on some of the director’s responsibilities.

The company secretary can be a director but can’t be:

• the company’s auditor
• an ‘undischarged bankrupt’ – unless they have permission from the court

The restrictions placed on a person when they’re made bankrupt usually end when they’re discharged. You can check if someone has been discharged using the Insolvency Register.

Even if you have a company secretary, the directors are legally responsible for the company.

5. Shares and shareholders

A company limited by shares must have at least one shareholder, which can be a director. There’s no maximum number of shareholders.

Shareholders are owners of the company and they have certain rights, eg directors may need shareholders to vote and agree changes to the company.

Issuing your initial shares

When you register a company you’ll need to make a ‘statement of capital’. This includes:

• the number of shares of each type the company has and their total value – known as the company’s ‘share capital’
• the names and addresses of all shareholders – known as ‘subscribers’ or ‘members’

Example A company that issues 500 shares at £1 each has a share capital of £500.

Prescribed particulars

Your statement of capital also contains information about shares known as ‘prescribed particulars’.

Your prescribed particulars say what rights each type (known as ‘class’) of share gives the shareholder, and must include:

• what share of dividends they get
• whether they can exchange (‘redeem’) their shares for money
• whether they can vote on certain company matters
• how many votes they get

6. Memorandum and articles of association

When you register your company you must get the agreement of all the initial shareholders and have rules about how the company will be run.

Make an agreement to form the company

You must make a ‘memorandum of association’ – a legal statement signed by all initial shareholders (known as ‘subscribers’) confirming they agree to form the company.

The exact wording of the statement can’t be changed – use a memorandum of association template to make sure your document is valid.

Make rules for running your company

Your ‘articles of association’ are the written rules about running the company that shareholders and ‘officers’ (directors or company secretary) have to agree.

They include rules about how to make decisions that affect the company and whether to involve shareholders in those decisions.

Model articles

Most companies use standard (known as ‘model’) articles. You can download model articles for a company limited by shares or a company limited by guarantee.

You can write your own articles but, if you do, you can’t register your company online.

Community interest companies

You can’t use limited company model articles if you’re setting up a community interest company (CIC).

Use the CIC regulator’s model constitutions instead.

7. Set up your company for Corporation Tax

You must give HM Revenue and Customs (HMRC) specific information about your company within 3 months of starting up in business. You may get a penalty if you don’t.

You can do this online once you’ve got your company’s Unique Taxpayer Reference (UTR).

HMRC will use this information to work out when your company must pay Corporation Tax.

Any business activity counts as starting up, eg buying, selling, employing someone, advertising or renting a property.

Your company’s Unique Taxpayer Reference

HMRC will send your company’s Unique Taxpayer Reference to your registered office address, usually within a few days of the company being registered (incorporated).

The letter tells you how to:

• give HMRC the information they need about your company
• set up your company’s HMRC online account for Company Tax Returns and Corporation Tax

What you must tell HMRC

You must tell HMRC:

• the date you started in business
• your company name and registered number
• the main address where you do business from
• what kind of business you do
• the date you’ll make your annual accounts up to

If you’ve taken over a business

You must also tell HMRC the name and address of the:

• company you took over
• person you bought the company from

If your business is part of a group

You must also tell HMRC the name of your business’ parent company and the address of its registered office.