Limited company

A limited company is an organisation that you can set up to run your business - it’s responsible in its own right for everything it does and its finances are separate to your personal finances.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

Ownership
Every limited company has ‘members’ - the people or organisations who own shares in the company.
Directors are responsible for running the company. Directors often own shares, but they don’t have to.

Legal responsibilities
There are many legal responsibilities involved with being a director and running a limited company.


Types of company

Limited by shares
Most limited companies are ‘limited by shares’. This means that the shareholders’ responsibilities for the company’s financial liabilities are limited to the value of shares that they own but haven’t paid for.

Company directors aren’t personally responsible for debts the business can’t pay if it goes wrong, as long as they haven’t broken the law.

Example
A company limited by shares issues 100 shares valued at £1 each when it’s set up. Its 2 shareholders own 50 shares each and have both paid in full for 25 of these.

If the company goes bust, the maximum the shareholders have to pay towards its outstanding bills is £50 - the value of the remaining 25 shares that they’ve each not paid for.


Private company limited by guarantee
Directors or shareholders financially back the organisation up to a specific amount if things go wrong.


Public limited company
The company’s shares are traded publicly on a market, such as the London Stock Exchange.

You can also consider setting up a private unlimited company as an alternative legal structure. Directors or shareholders are liable for all debts if things go wrong.



How to set up a limited company
You must register the company with Companies House and let HM Revenue and Customs (HMRC) know when the company starts business activities.


Tax responsibilities
Every financial year, the company must:
The company must register for VAT if you expect its takings to be more than £82,000 a year.

If you’re a director of a limited company, you must:
  • Fill in a Self-Assessment tax return every year 
  • Pay tax and National Insurance through the PAYE system if the company pays you a salary 

Setting up a private limited company
To set up a private limited company you need to register with Companies House. This is known as ‘incorporation’. You need:
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.


How to register
You can register online with Companies House if your company:
Otherwise, you must use a different method of registration - www.gov.uk/limited-company-formation/register-your-company


Register for Corporation Tax
Your company will also need to register for Corporation Tax within 3 months of starting to do business.

You can register your company:

If your company is 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.