Setting up a limited company is a major step for entrepreneurs, freelancers, and small business owners who want to formalise their operations and protect their personal assets. Whether you are launching a new venture or transitioning from sole trader status, incorporating a company can bring credibility, tax efficiency, and legal separation between you and your business.
Why Set Up a Limited Company?
Operating as a limited company gives your business a separate legal identity. This means the company can enter into contracts, own property, and take on debt—while shielding you from personal liability. You pay corporation tax on profits, and income can be drawn through a combination of salary and dividends, which may provide tax planning opportunities.
Steps to Set Up a Limited Company
- Choose a Company Name
Your name must be unique and not too similar to an existing company. It should not include restricted words unless permission is granted. You can check availability on Companies House. - Appoint Directors and a Company Secretary (if needed)
A limited company must have at least one director who is legally responsible for running the company. You can also appoint a company secretary, though it is optional. - Register an Official Address
This will be your company’s registered office—an official address where HMRC and Companies House can send correspondence. It must be a physical UK address. - Decide on Share Structure
Even if you are the only shareholder, you will need to issue at least one share. You can set up different classes of shares if you plan to bring in other investors or co-founders. - Prepare a Memorandum and Articles of Association
These are legal documents that outline how the company will be run. Companies House provides model articles you can adopt or amend to suit your business. - Register with Companies House
You can register online for a fee of £12 and receive a certificate of incorporation within 24 hours in most cases. This makes your company legally active. - Register for Corporation Tax
After incorporation, you must register with HMRC for corporation tax within three months of starting business activity.
Additional Considerations
- Open a business bank account: This separates your personal and company finances.
- Set up PAYE: If you plan to pay yourself a salary, you will need to register as an employer.
- Consider VAT registration: Mandatory if turnover exceeds the threshold (£90,000 as of 2025), but optional for others seeking professional credibility.
- Keep accurate records: You are legally required to keep financial and statutory records, which can be managed using accounting software or with the help of a professional.
Do You Need an Accountant?
While it is possible to set up a limited company on your own, many choose to work with an accountant to navigate the complexities of tax, compliance, and financial planning. A good accountant will also help you structure your salary and dividends efficiently and stay ahead of deadlines.
Final Thoughts
Setting up a limited company service can be a smart move for growing your business with structure, professionalism, and legal protection. It does come with more administrative responsibility, but the benefits—such as limited liability, potential tax efficiency, and greater access to finance—make it worthwhile for many entrepreneurs.
