How to set up a limited company in the UK

A private limited company is a legal entity separate from you: its finances are separate from your personal ones, and members' liability is limited. To create one, you register (incorporate) the company at the state register, Companies House, and you must do so before you start trading.

How much does registration cost?

Registering a company online costs £50. Most companies with one to nine directors can apply online. It is the quickest and cheapest route; a paper application costs more and takes longer.

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Who do you need to form a company?

You need at least one director; a company secretary is optional. You also need at least one shareholder — who can be the same person as the director. Separately, you must identify people with significant control (PSC) — for example anyone with more than 25% of the shares or voting rights. These details are confirmed at registration.

What else is required?

First choose a name and check it is available and does not infringe existing trade marks — there are naming rules to follow. You also choose a SIC code, which identifies what the company does. You must prepare governing documents: a memorandum of association and articles of association, setting out how the company is run.

What duties arise straight away?

A company pays Corporation Tax on its profits, so soon after starting to trade you must separately register for it with HMRC. The company then has annual duties: filing accounts and a confirmation statement at Companies House, and tax returns. If you employ staff or pay yourself a salary as a director, you also need to register as an employer for PAYE. It is best to plan for these duties in advance to avoid missed deadlines and penalties.

Company or self-employment — which to choose?

A company is not the only option: you can also work as a sole trader. A company has real advantages: limited liability (your personal assets are generally protected from business debts) and sometimes more flexible taxation. But there is a flip side — more formality: separate filings at Companies House, some director and owner details on the public record, and directors' legal duties. Being a sole trader is simpler to run, but personal liability for debts is not limited. For many the choice depends on the size of the business, the risks, and whether you are ready for stricter record-keeping; if in doubt, it is worth discussing with an accountant before you register.