Setting up a Limited Company can be a great option for many businesses and bring a number of benefits and tax-efficient options to the table, but knowing what to do, why it needs to be done, and when it must be ready, is essential to getting it right.
A Limited Company is treated as a separate legal entity to the owner/s, and has liability protection, meaning personal assets will be kept separate if there are any issues. There are options to be Limited by Shares, or Limited by Guarantee. We’re going to walk you through 5 stages you need to look at, before and during the process of setting up a Limited Company.
Check that Setting up as a Limited Company is Actually the Right Option
There are a number of different ways to set up a business, such as a self-employed sole trader, business partner, a social enterprise, an overseas company, or an unincorporated association. Understanding what your business is and does, and whether it’s beneficial to become a Limited Company is essential before you start the process.
Names Must be Carefully Chosen and Follow the Rules
The Limited Company must have a business name that isn’t the same or too similar to a registered company’s name or trademark.You should avoid:
- – Same as Names – unless you’re forming the company as part of the same group or Limited Liability Partnership [LLP] that has the existing name or have written confirmation that the company or LLP have no objections to your new name.
- – Too Like Names – For example: Easy for You, and Easy 4 U would be treated as being too similar
- – Offensive, Sensitive or Profane Words
You can use a different name to trade (your Trading Name, also known as the Business Name) but it must not include ‘limited’, ‘ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’, or ‘PLC’.
A Director Must be Appointed to the Company.
The Director of the LTD company is responsible for taking money out, reporting changes, keeping company accounts, confirming statements such as the annual tax return, and ensuring the business is following the company rules shown in the articles of association.
A Company Director who doesn’t meet their responsibilities risks being fined, prosecuted, or disqualified from being a Company Director.
Shareholders, Guarantors, and People with Significant Control (PSC)
A Limited company must have at least one shareholder or guarantor, who can be a director. Your business may not have People of Significant Control (PSC), sometimes called ‘Beneficial Owners’, but if you do – they must be identified, and their details recorded on your company’s PSC register.
PSC’s are generally those that hold:
- – More than 25% of the shares in the company
- – More than 25% of the voting rights in the company
- – The right to appoint or remove the majority of the Board of Directors
- Record Keeping Must be Set Up and Followed
- For Limited Companies, there are two types of records that must be kept:
- – Records about the company
- – Financial and accounting records for the company
There are fines and penalties that can be levied if the company does not keep their records up-to-date, so it’s vital that you know what you need to record, who needs to know about it and have access to it, and when the deadlines for submission are.Company records must include information about the Directors, Shareholders, and Company Secretaries, as well as the results of any shareholder votes and resolutions, details of loans, indemnities, share transactions, and financial matters such as loans or mortgages secured against the company.
Financial records must include all information regarding the incomings and outgoings of the company, as well as details of owned assets, debts that are owed or owing, stock owned at the end of the financial year, and any goods bought or sold.
If you’re setting up a Limited Company, or aren’t sure if you’d benefit from being one, our experts are here to help you work out the best course of action, and help you get your company sorted from set-up and registration to operation through our company formation service.
Get in touch today and discover how we can help you make your business better.
