Business Growth

How much does it cost to set up a limited company in the UK?

set up a limited company

Setting up a new-venture limited company in the UK is relatively inexpensive: you can undertake the process yourself or ask your accountant to manage it for you; there are also Company Formation firms that will undertake the process on your behalf. It is essential that everything, including the model of the company and its name and all the paperwork and procedures are correctly carried out and processed, so it is probably best to ask an expert to oversee the process unless you are a competent administrator.

The model of your company

To register online with Companies House your company must be limited by shares and use standard articles of association (known as “model articles”). If not, a different method of registration must be used. For example, you cannot use limited company model articles if setting up a community interest company (CIC).

Providing your company is limited by shares, the costs are as follows if you go it alone:

  • Online applications, usually registered within 24 hours at a cost of £15.
  • Postal applications take 8 to 10 days and cost £40.
  • Same-day service costs £100. The application to Companies House must arrive there by 3 p.m. and the envelope marked “same day service” in the top left-hand corner.

The process

The process of setting up a private limited company is known as “incorporation”. To incorporate, you must register the company with Companies House according to the process outlined below:

  • Register a company name paying attention to the strict rules that govern naming a company.
  • Register the address for the company, known as your registered office address (ROA), which can be an official address such as your accountant, or your office or home address.
  • Name at least one director (responsible for running the company), who must be over 16 years old and not be a bankrupt.
  • At least one shareholder must be named. Provide agreement of all initial shareholders (“subscribers”), which is known as a “memorandum of association”. Here is a memorandum of association template.
  • Provide details of the company’s shares and the rights attached to them, this is known as a “statement of capital”. A company limited by shares must have at least one shareholder, who can be a director. There is no maximum number of shareholders.
  • Provide written rules about how the company is run, this is known as the “articles of association”.
  • Nominate a company secretary, although it is not essential to have a company secretary for a private limited company, some company use the secretary to take on some of the director’s responsibilities, although the director(s) remain legally responsible for the company.

Once you have registered the company you will receive a “Certificate of Incorporation”. This proves the company legally exists and shows the registered number and date of incorporation of the company.

Register for Corporation Tax

Your company must register for Corporation Tax within three months of starting to do business, “doing business” includes buying, selling, employing someone, advertising and renting a property, certain other activities are also included. You will be penalised and questions will be asked if you register late.

To register for corporation tax you need your company’s 10-digit Unique Taxpayer Reference (UTR). This is usually posted to your ROA by HMRC within days of registration with Companies House. You will also need your company’s registration number and the date you started to do business. This date will fix your company’s first accounting period, and will remain the date on which your accounts should be filed annually. Once you’ve registered for Corporation Tax, you’ll be able to sign in and report it in your Company Tax Return.

Registered Office Address (ROA)

Your company address will be publicly available on the register at Companies House, which is why a home address is not preferred by many company owners. Your ROA is where official communications from Companies House and HMRC will be sent. The address must be a physical address in the same country as the company registered; if you register the company in England, it must have a ROA in England; if you register the company in Northern Ireland, it must have a ROA in Northern Ireland. The address can be your home address or the address of the person who will manage your Corporation Tax, i.e. your accountant, but the address must meet the rules.

Conclusion

It generates quite a lot of paperwork to incorporate a business in the UK and this article has taken your through the main procedures. But if you are not a confident administrator, hiring a company formation agent does not add huge cost (incorporation is an allowable business expense). The time it takes to set up a company in the UK is relatively short, but guard against making errors in this foundational stone of your company as mistakes can be costly and take ages to sort out.

About the Author:

Sumit Agarwal
, A specialist accountant and tax adviser for freelancers, contractors and small businesses since 2005, He is an expert in business growth and development strategies. A renowned tax expert for owner managed businesses and contractors, He won the British Business Forum’s Young Entrepreneur Award in September 2012, presented at the House of Commons by MP Vrinder Sharma.