How to Start a Limited Company

Setting up a limited company is an exciting venture, but the process can seem daunting.

From registering the business to deciding on shareholders and directors, every decision matters.

This guide outlines the three main methods for setting up a company and provides insights into common pitfalls to avoid.

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(Read Time: Approx. 4 minutes)

Topics Discussed:

• Key steps in setting up a company
• Common mistakes to avoid during the registration process

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How to Start a Company

There are three principal ways to start a new company:

1. Register the company yourself with Companies House online.
2. Hire a company formation agent to manage the process for you.
3. Purchase an off-the-shelf company, which is pre-registered, and then change its name, directors, and other details.

Before registering, you’ll need to make a few crucial decisions.

These include selecting a company name, choosing its registered address, and determining the shareholders and directors.

You’ll also need to decide how many shares your company will have and what rights will be attached to them.

Part of the registration process involves adopting or modifying the Articles of Association, making a statement of initial capital, confirming persons of significant control (PSCs), and ensuring the company is being established for a lawful purpose.

Additionally, it is mandatory to register the company with Companies House and HMRC.

Once the company is officially registered, there are ongoing obligations such as filing annual accounts, a confirmation statement, and submitting a Corporation Tax return once the company starts earning income.

Any changes in beneficial ownership throughout the year must also be updated to reflect changes in PSCs.

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Common Errors When Forming a Company

Not all pre-trading expenses are created equal. Below are some categories of expenses that typically qualify for this relief.

• Registering the wrong type of company: Some people mistakenly register a company limited by guarantee instead of one limited by shares.

• Incorrect share capital values: This is a frequent mistake that can lead to complications later.

• Incorrect details for officers: Failing to accurately record the names and roles of directors and shareholders.

• Misunderstanding Articles of Association: Either adopting the model Articles without fully understanding them or attempting to modify them without a clear understanding of the implications.

It’s essential to review all details carefully during registration to avoid such mistakes.

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Annual Responsibilities

Once your company is operational, the work doesn’t end. There are legal requirements to meet on an annual basis:

1. Filing accounts: Each year, you must submit financial statements to Companies House.
2. Confirmation statement: This updates Companies House on the company’s directors, registered office, share capital, and shareholders.
3. Corporation Tax return: After generating income, the company must submit a tax return to HMRC.

Failing to meet these requirements could result in penalties and legal complications.

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Planning Points and Pitfalls to Avoid

Starting a company is just the beginning.

It’s important to make sure that all legal requirements are met from the outset to prevent future issues.

This includes ensuring that the Articles of Association are suitable for your business and keeping accurate records of any changes in share ownership or company officers.

If you’re unsure about any aspect of the process, seeking professional advice early on is highly recommended.

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Summary

Starting a company is a rewarding venture, but it’s essential to understand the steps and responsibilities involved.

From selecting the right company structure to managing annual filings, each step is crucial for ensuring long-term success.

If you’re considering starting a company, don’t hesitate to seek expert advice to ensure a smooth and compliant registration process.

Contact Ilyas Patel Accountants today to get tailored support for your business journey.

Fill out our form here for any questions, give us a call at 01772 788200, or message us on our WhatsApp for out of office hours.

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Kind regards,

Ilyas Patel