Many people are stopped from going after their business dreams because of how hard it is to start one. Of course, if you’re reading this, it’s likely you want to start your own.
Starting a company is exciting and rewarding but can seem like a daunting task. But don’t worry, we’ll guide you through every step required to establish your limited company. But what is a limited company?
This type of company allows you to legally run your enterprise as its entity, separate from yourself. This way, what happens with the business won’t affect your personal things.
This article will walk you through the process of creating one and explain each step along the way. After reading this article, starting your own limited company will be no problem. Let’s get right into it.
What is a Limited Company?
Before we go into the specifics of forming a limited company, defining what one is is vital.
A limited company is a legal entity distinct from its shareholders, which has the ability to legally bind itself through contracts and assume financial obligations in its name. Therefore, if you register Ltd company, it means that each shareholder in the company is solely responsible for their initial investment.
Any number of shareholders and directors can own and run a limited liability company, or a single person can hold both positions. Furthermore, the limited liability company will require a business bank account. All funds in the business account are the sole property of the company until transferred to your personal account.
Steps of Forming a Limited Company
1. Naming Your Company
Choosing a business name is the first step in forming a limited liability company. Although it may appear easy, picking a company name that is both distinct and conveys the nature of your offerings may be a challenge. Take your time with this since someone might file a complaint if your limited company name is too close to an existing business or trademark.
The name of your limited liability corporation must finish in either “Ltd.” or “Limited,” and it must not be insulting. Visit the Companies House portal to see if the name you want to use for your business is available.
2. Company Address
The limited liability company must have a proper address, and this address must be a physical location inside the United Kingdom and in the same nation as the business’s place of incorporation.
For instance, if your limited company was established in Scotland, the firm’s registered office address must also be in Scotland. The address you indicate may be that of the person responsible for handling your Corporation Tax or your home address.
3. Create Boards of Directors
If you’re forming a private limited corporation, the country’s legal framework requires you to appoint at least one director. Consequently, when you become the director of a limited liability company, you accept legal responsibility for the business’s operations and the accuracy of financial records, reports, and statements.
4. The Concept Of Shares And Shareholders
Most new companies are “limited by shares,” giving their owners and shareholders specific legal protections and privileges. Typically, there is only one shareholder in a private limited company; this person also serves as the company’s director.
If your limited liability corporation has more than one shareholder, you can set the price of each share at anything you choose. When a limited company goes bankrupt, shareholders must ensure the entire payment for its shares is given. Another thing they need to do when creating a limited liability company is provide a ‘statement of capital.’ This statement must include details on all the shares owned by the firm.
5. Memorandum and Articles of Association
In order for a limited liability corporation to come into existence, both a memorandum and articles of association have to be completed. When it comes to the memorandum, it’s as simple as signing your name if you’re going solo.
Even though you can use someone else’s sample memorandum when officially registering your business, you won’t be able to make any changes to it after registration. The formal procedures of running a business are written in an article of association that all shareholders, company secretary, and directors must sign.
6. Establish your company and register it
If you have completed the steps outlined above, you will have all the information necessary to register a limited liability company. To qualify for online registration, your limited liability company must meet the following criteria:
- It’s limited by shares
- It employs the standard article of association or “model articles” as opposed to a custom-written article of association
7. Register for Corporate Tax Compliance
You need to sign up for Corporation Tax during the first three months of starting your business. This includes buying, selling, advertising, renting a space, or hiring someone. In most cases, you can complete this process online.
All that’s needed for your business is your 10-digit unique taxpayer identifier. Once HMRC has received the information they need from you, they’ll tell you when your payment is due. Profit and loss doesn’t matter since a Company Tax Return must always be filed.
One of the most crucial steps in starting a business is establishing a limited liability company that is structured properly. If you’re running a business, forming an LLC can help shield you from personal liability while providing other advantages. Being protected from personal liability can come in handy, especially if your company gets sued in a legal court and the damages to be paid exceed the value of your company’s assets.
Since the limited company name is what you’ll be doing business under, it’s natural that it would induce a bit of nervousness in even the most business-savvy of people. To avoid any problems in the future, you should be sure to get all the details right. Follow this guide to establish a limited company successfully.