How do you form a limited company?

If you have decided to set up your own limited company, you need to decide whether to set up the company via your accountant, through an intermediary (such as a company formations firm), or apply online and do it yourself.

Some accountants will include the set-up administration costs if you sign up for their ongoing services, whereas others will charge a one-off fee for taking forming your company and associated costs.

You can either use an existing company (which has been formed but has never been used), or form one from scratch – the more likely route for most business owners.

This article covers just the mechanics of setting up a private limited company. We will look at other limited company issues in future articles.

Company formation paperwork

To complete the incorporation process, three pieces of information need to be lodged with Companies House.

1. Form IN01, which contains the key details about the company, including the registered office address, details on directors and shareholders, and information on the share capital.

2. Articles of Association, which outline how the company is going to be run, and the powers and rights of shareholders and directors. You will typically use generic ‘model’ articles – see here.

3. Memorandum of Association, outlining confirmation of its subscribers intentions to form the company. Once the company is live, however, this becomes just a historical document.

Company officers

A limited company must have at least one director. Since the implementation of the Companies Act, you no longer need to appoint a Company Secretary, although you may choose to do so. A sole director can also be the Company Secretary.

Company name

Assuming you are choosing a new company name, rather than using a pre-formed company, you need to abide by certain naming restrictions to prevent you from using ‘offensive’ or ‘sensitive’ words or expressions – for example, words with imply that you are qualified in some way that you are not. You cannot choose a name which is deemed to be too similar to one already in existence, and you should not use trademarked expressions in your company name.

Registering your company

There are 3 ways to register your contractor limited company:

1. Via your accountant, as mentioned above.

2. Via a formations agent – there are hundreds of online services available. We’ve used Duport many times in the past.

3. Direct via Companies House – using the online web incorporation process. This is the fastest method and costs £15 (compared to £40 for the paper-based service).

Further information

We would advise talking to an accountant before setting up a company, even if you incorporate direct with Companies House. You should be aware of the legal responsibilities you will have as a company director, and the tax implications of setting up a limited company.

We will cover many common tax issues on Company Bug over the coming months.

Read Companies House guidance on incorporation and company naming here.