In order to trade as a limited company you first need to register with Companies House. The registration process is known as ‘incorporation’. You may wish to read our article on choosing a business structure to help you decide whether a limited company is right for you.

There are many companies that will register your company for you. However, if you want to save yourself some cash you can do it yourself.

What do I need to register my limited company?

There are three main things to think about before registering a limited company:

• What type of limited company do you wish to form?
  
• Who are the company officers?
• Do you have a suitable company name?

Let’s look at these requirements individually.

Types of limited company

There are two main types of limited company: private limited companies (often referred to as Ltd) and public limited companies (known as PLCs).

Most newly formed companies are private limited companies. The main differences are as follows:

• Public limited companies must have at least £50,000 in share capital. There is no such requirement for private limited companies.
• Public limited companies must have at least two shareholders. They must also have at least two company directors (as opposed to just one in a private limited company) and a company secretary.
• Public limited companies can sell shares on the stock markets; private limited companies cannot.

Many self employed individuals choose to set up a limited company in order to benefit from the reduction in liability that this arrangement offers. Private limited companies are generally better suited to this purpose as a result of their comparative simplicity – although you should, of course, always seek expert independent advice before making a decision.

You must also decide whether your company is to be limited by shares or by guarantee. Shareholders in a company limited by shares have no personal liability for the debts of the company, as long as they paid for their shares in full. If they did not pay for their shares, their liability is limited to the outstanding amount owed for those shares. So, if shares are valued at £1 each and there is just one shareholder, the maximum liability endured by that shareholder would be £1.

If a company is limited by guarantee, the individuals forming the company will agree on levels of liability. It is worth noting that this legal structure is generally favoured by social enterprises and is not normally recommended for ‘regular’ companies.

Company officers

Company officers are the individuals legally responsible for the running of the business. These are the company directors and the company secretary.

In a private limited company there need only be one company director. A company secretary is not required. Public limited companies, on the other hand, must have at least two company directors and a company secretary. The company secretary must have a formal qualification.

All company directors must be at least 16 years old.

It is perfectly possible to set up a limited company with just one officer. In these cases you will need to incorporate a private limited company. If you later choose to appoint a company secretary, they cannot be the same problem as the director.

Choosing a company name

There are strict rules governing acceptable names for limited companies.

Primarily, and fairly obviously, you cannot use a name that is already in use by another limited company. You can check the availability of names on the Companies House website by clicking here. You may not use offensive words, or names that are very similar to names already in use.

There are also several ’sensitive’ words that can only be used in the names of limited companies if you have prior permission. These include words like national; international; British; holdings; group; and trust. A full list of sensitive words, with details of the authorities that must be contacted if you wish to use them, is available on the Companies House website by clicking here.

Having decided on a structure, found company officers and chosen a suitable name, you then need to complete a number of forms.

Company registration documents

There are four main documents that you need to complete and return to Companies House in order to incorporate a company. These are:

• the Memorandum of Association, which gives basic details about the company including its name and the type of business that it will carry out;
• the Articles of Association, which outline the structure of the company and the way in which it will be run. This document explains how many shareholders there will be, and what rights will be assumed by the directors;
• Companies House form 10, which names the company directors and secretary (where applicable) and gives details of the registered office;
• and Companies House form 12, which declares that the company meets the legal requirements necessary for it to qualify for incorporation. Form 12 must have a witness signature.

Statutory documents can be downloaded and completed. If you wish to incorporate a company in England, Scotland and Wales the relevant documents can be downloaded by clicking here. If you wish to incorporate a company in Northern Ireland the documents can be downloaded by clicking here.

The cost of incorporation

Companies House currently charges £20 for company incorporation, or £50 for a one-day turnaround. The Memorandum of Association and Articles of Association are only available from legal stationers, at a cost of around £30. You should not pay more than around £10 to have form 12 witnessed.

It is also worth remembering that there are many firms offering to incorporate your company for you. Many offer a one-day turnaround for around £50.