In the UK, it is best to set up a private limited company to separate your business liabilities from your personal assets. This strategic move can offer significant tax efficiencies.
Whether you are a non-resident or a local entrepreneur, the tax process is relatively straightforward, but it demands careful attention to legal requirements. You will have financial, legal and other responsibilities when running a limited company.
Let’s discuss how you can register a private limited company in simple steps to protect your assets and grow your business.
Need help? Cheap Accountants in London are available to guide you to set up a private limited company in the UK. Stay in touch!
Why You Should Set Up a Private Limited Company?
Private limited companies are a popular company type. They account for over 90% of all registered companies in the UK. If you have decided to start a private company, you have made a good choice. Setting up a private limited company offers relatively quick and simple ways to boost your business’s credibility.
Moreover, it offers critical protections as your business grows. Since your personal finances are protected in the event of company debt or insolvency, there is lower financial risk for owners and directors.
Tax Efficiency
When your profits increase beyond £30,000 to £50,000 or more, it is more tax-efficient to set up a private limited company. A limited company may pay less corporation tax at a lower effective rate compared to the income tax paid by sole traders.
Additionally, you can mix salary and dividends to keep your tax bills lean. A dividend strategy helps you save money because you avoid paying National Insurance (NI) on the dividend portion of your income.
Limited Liability
The most significant reason to set up a private limited company is the limited liability. This means your personal assets, like savings, a car, or a house, are safe if things go wrong. The creditors can take assets that belong to the company, like the bank balance or equipment, but cannot take your personal assets.
Pension Perks
Pension contributions are made through a limited company. You do not pay National Insurance Contributions (NIC) because the company pays directly into your pension. This can help reduce Corporation Tax, as employer pension contributions are treated as allowable business expenses.
Professional Credibility
The suffix “Ltd” carries a value in the business world. Having this suffix after your business name boosts credibility instantly. Your customers, investors and vendors tend to trust you more than a sole trader setup.
Moreover, government bodies and large corporations see you as a more established company and tend to work with you. Registering with Companies House protects your company name, as no other limited company can register the same name.
Raising Capital
Another important reason why you should set up a private limited company is to raise capital. Since you become credible, you can easily secure funding.
If you need funding, a company can issue shares to investors and secure bank loans more easily.
Furthermore, a private limited company has a longer lifespan because it exists independently. If the director leaves or passes away, the business continues to exist.
How to Register a Private Limited Company in the UK?
Registering to set up a private limited company is an easy process. You can complete the process entirely online.
Choose your Company’s Name
This is the very first step that many business owners overlook. You need to select a unique brand name that is not already taken. If it’s the same as an existing brand, Companies House will reject it. Here is what you must do:
- Make the brand name unique
- Don’t forget to check the trademarks. Check with the Intellectual Property Office and avoid surprises later.
- Check for restricted or sensitive words. Misleading or offensive names can lead to rejection of the brand’s name.
- Your company name must end with “Limited” or the suffix “ltd” as it is a legal requirement.
- Keep the name simple and avoid using hyphens or characters.
Register Office Address
Decide on an official UK address where all official mail will be sent. Your registered office needs to be a physical location in the UK, and in the same UK jurisdiction as your company registration.
Remember to keep your registered office updated with Companies House. Using the wrong address can lead to compliance problems and penalties.
SIC Code
Find the right SIC code for your business. This 5-digit code describes what your business does. Use the “Find and update company information” service and carefully select it.
Note: Although the construction industry needs an SIC code, they do not strictly need to register or set up a private limited company.
Appoint Shareholder and Company Director
Before starting your company officially, appoint at least one shareholder and one company director. This shows who is in charge and owns a share of the business.
Gather your Documents
Get your documents ready so the registration process goes smoothly. You need the right documents as they establish the company’s identity and operational protocols. You will need to submit:
- Memorandum of Association
- Articles of association
- Form IN01 (application to register a company)
Register with Companies House
This step is the core step to set up a private limited company. Submit your application, along with documents, to the Companies House and officially register your company.
If you want the fastest and easiest way, register online. You can file and complete your documents digitally.
Costs and Timeline
If your documents are complete and accurate, and submitted online, Companies House typically processes the applications within 24 hours. However, the application by post may take Companies House to process it in 8 to 10 days.
Visit the UK official government website to check the Companies House fee for registration.
Once your company is approved, Companies House sends you a digital certificate and an 8-digit company number to confirm your company’s legal existence.
What Happens After Registration?
When you complete your registration, you successfully set up a private limited company. After registration, you need to open a business account. Since your company is a separate legal entity, having a separate business account is legally mandatory.
A business account helps you manage your business finances and prevent mixing them with personal finances. Additionally, it ensures clear financial records and manages payroll, income, expenses and taxes (Corporation Tax and Value Added Tax) more smoothly.
Note: You need to register for VAT when your taxable turnover is more than £90,000.
How Can a Professional Help Support You When You Set Up a Private Limited Company?
Although you can register yourself as a private limited company, hiring an expert can prevent tax errors and penalties.
At Cheap Accountants In London, we have experienced professionals who handle the entire registration process while ensuring compliance with the UK tax regulations.
Reach out to our professionals and set up a private limited company without any hassle!
Bottom Line
Setting up a private limited company is more than just paperwork; it’s a framework that offers a financial shield through limited liability. It protects your assets, helps you secure funds, boosts professional credibility and tax efficiency. These long-term benefits outweigh the initial effort of registration and its fee.
Follow the steps in this blog to ensure complete and accurate filing of your documents. Set your business on a path of compliance and grow your business safely and legally.
Reach out to one of our professionals to get to know about set up a private limited company in the UK. Get in touch with us, and you will be provided instant professional help!
Disclaimer: This article intends to provide general information on set up a private limited company in the UK.
