A Step-by-Step Guide: How to Set Up a Limited Company in the UK

Setting up a limited company in the UK is a crucial step for entrepreneurs looking to raise funding, attract angel investors, or secure venture capital for their startups. In order to actually offer shares in your business to investors, those shares need to exist first! In addition, a limited company structure not only offers credibility but also limits personal liability, making it an attractive option for new business owners. Here's a step-by-step guide on how to establish your limited company.

1. Check if a Limited Company is Right for You

Before diving in, ensure that setting up a limited company aligns with your business goals. A limited company is a separate legal entity, meaning your personal assets are protected in case of business failure. However, this also comes with more administrative responsibilities compared to being a sole trader or in a partnership. In any event, if you came to ThatRound to raise capital, you’ll need to set up a Limited Company first.

‍2. Choose a Company Name

It’s important that the name is unique and complies with the UK’s regulations. You can check the availability of your desired company name using the Companies House Name Availability Checker. Ensure the name is not too similar to existing businesses and does not contain any sensitive or restricted words unless you have the appropriate permissions. We also recommend that you overlay this check with a Domain Name check, to make sure the company name you’ve picked has a website URL available that you like, you can use services such as GoDaddy to do this. 

3. Appoint Directors and a Company Secretary

Every limited company needs at least one director. The director is legally responsible for running the company and making sure its accounts and reports are properly prepared. While appointing a company secretary is optional, it can be helpful to delegate some of the director's administrative duties. If you are looking to raise capital via a fundraising service listed on ThatRound, we recommend also looking into Director and Officers Liability Insurance, it provides financial protection to company directors and officers against personal losses if they are sued for alleged wrongful acts in their role within the company. 

4. Decide on Shareholders or Guarantors

You need at least one shareholder or guarantor to set up a limited company. Shareholders own the company and can be directors as well. You’ll need to issue at least one share to each shareholder. This is usually the Founder or Co-Founders of the business. 

5. Prepare the Necessary Documents

You will need to draft a memorandum of association, which is a legal statement signed by all initial shareholders agreeing to form the company. Additionally, you’ll need articles of association, which set out how the company will be run. Standard templates for these documents are available on the Companies House website.

6. Register Your Company

Once your documents are ready, you can register your company online with Companies House for a fee of £50. Registration typically takes 24 hours. You can also register by post, which takes 8-10 days and costs £71. Upon registration, you will receive a certificate of incorporation, confirming that the company legally exists.

7. Register for Corporation Tax

Most companies can register for Corporation Tax at the same time as registering with Companies House. If not, ensure you do so within three months of starting business activities by registering with HMRC.

8. Set Up a Business Bank Account

To keep your business finances separate from personal finances, it’s essential to open a business bank account. Most UK banks offer specialised accounts for limited companies, often with tools and services tailored for small businesses.

9. Understand Your Ongoing Responsibilities

Running a limited company comes with ongoing responsibilities, including filing annual accounts, submitting a confirmation statement, and keeping accurate financial records. Make sure you stay compliant to avoid penalties. It’s usually worth enrolling the business with an accountancy service who can advise on all of these matters.

10. Seek Professional Help

Consider using services like 1st Formations to streamline the process. They offer various packages, including name checks, document preparation, and even registered office services to simplify the registration process.

11. Understand How a Limited Company Attracts Investors

Starting a limited company in the UK is a key step for entrepreneurs seeking to raise funds through angel investors or venture capital. A limited company structure provides a clear legal framework, transparency, and scalability, making it appealing to investors. Additionally, it enhances credibility and limits personal liability, protecting your assets.

To attract investors, such as angel investors or venture capitalists, it's important that your business is structured as a limited company, as this allows you to issue shares. By following this step-by-step guide, you can successfully set up your company, laying a strong foundation for growth and future investment opportunities. Be sure to meet all legal requirements and utilize available resources to streamline the process.

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