NEW BUSINESS • 19 SEPTEMBER 2024 • 5 MIN READ

Top 9 things to think about when setting up a limited company

SECTIONS

1. What’s your company name?

2. Is your company going to be limited by shares or by guarantee?

3. Who are the directors and shareholders going to be?

4. Register your company with Companies House

5. Register with HMRC

6. Get a company bank account

7. Choose an accounting software

8. Write a business plan and a budget

9. Hire a professional

Setting up a limited company is an exciting step towards your dream. However, it's important to be well-informed and prepared.

In this guide, we'll walk you through the top things to consider, from choosing a company name to understanding your legal and tax obligations.

1. What’s your company name?

Your company name (the one you register) doesn't have to be the name your customers know you by. You can use a different "trading name" for your day-to-day business.

The name of your business as it’s registered at Companies House is the official legal name of the business – it needs to be unique and follow the rules. For example, you can’t use the same or largely similar name to another unrelated company. It’s also not allowed to contain any specific sensitive, abusive, offensive or illegal words, and for a private company it must end in limited or ltd. Just remember to use your registered name on all official paperwork.

On the other hand, your trading name is more flexible, allowing you to create a brand that resonates with your customers.

2. Is your company going to be limited by shares or by guarantee?

Once you’ve decided to operate via a company structure, you need to decide whether your company is going to be limited by shares or by guarantee.

If you want to start a business to make money that you can personally benefit from, a "limited by shares" company is probably the best choice. This is the most common type of company. You own shares in the company, and any profits are shared out among the shareholders.
If you're starting a non-profit organisation like a charity or a club, then "limited by guarantee" is the better option. In this type of company, there are no shareholders and there is less likely to be profits to share. Instead, it's run by 'guarantors' who agree to pay a small amount if the company runs into financial trouble.

There’s more information on limited companies on HRMC’s website.

It’s worth noting that with a limited company structure, you’ll have more tax and compliance responsibilities, read more details here.

If you’re thinking about setting up as a limited company, Beany is here to help. Get in touch with us to discuss your situation.

3. Who are the directors and shareholders going to be?

There are 2 main roles in a company:

Shareholders: These are the owners of the company. They invest money in the company and in return, they get a share of the profits. This share of the profits is called a 'dividend'.
Directors: These are the people who manage the day-to-day running of the company. They make the decisions and ensure the company is operating smoothly.

It's important to note that one person can hold both roles. You can be a shareholder and also a director at the same time. Or, you could be just one or the other.

4. Register your company with Companies House

Registering your company with Companies House is a straightforward process, costing £50. To get started, you'll need to have your company name ready, along with the details of your directors and shareholders. Also, you'll need to have a clear idea of your business activities. Once you've submitted your application, your company is typically registered within 24 hours.

Ready to take the next step? Let Beany guide you through the company formation process, ensuring everything is done correctly and efficiently. Register today.

5. Register with HMRC

Once your company is up and running and starts trading, there are several important tax registrations you'll need to complete with HMRC, regardless of whether you're making a profit yet:

Corporation tax: Within three months of the commencement of any business activities, you must register for corporation tax. This is the tax your company pays on its profits.
Valued added tax (VAT): If your annual turnover reaches the VAT threshold (currently £90,000), you'll need to register for VAT. Once registered, you'll need to file regular VAT returns, usually quarterly.
Pay As You Earn (PAYE): If you have employees or you're a director taking a salary from the company, you'll need to register for PAYE. This system allows you to deduct income tax and National Insurance contributions from your employee's wages and pay them to HMRC. You'll also need to run payroll and submit Real Time Information (RTI) filings to HMRC each time you pay your employees.

6. Get a company bank account

When setting up a company, you should also open a separate business bank account. This is because a limited company is a separate legal entity to yourself, even if you own it and run it. Any money the company makes or spends should come out of this bank account. Not only is this a legal requirement, it also makes your company’s finances so much cleaner and easier, especially during the tax season!

7. Choose an accounting software

There is so much value in using accounting software, such as Xero or Quickbooks, from the outset. A key benefit is that you can clearly see how your business is doing, and it will help you gain a better insight into how your business is performing. For example, you will be able to identify which products or services are doing particularly well or not so well.
Read more: How Xero accounting software enriches your business

8. Write a business plan and a budget

We all know the saying fail to prepare and you’re preparing to fail. This couldn’t be more relevant when starting a company.

Before you jump in, it's crucial to do your homework. Understand your customers, your competitors, and the overall market. Then, create a clear plan outlining how you'll reach your goals.

Also, it’s important to make a budget. This helps you keep track of your spending and spot any problems early on. Think of it like a roadmap for your finances – it keeps you on track and helps you avoid getting lost.

Read more: What is a budget?

9. Hire a professional

There is so much to think about when setting up a limited company, but if you do it right it can be a super exciting journey. If setting up a company is completely new to you then it’s a good idea to get a professional, like an accountant involved. They can help with everything from checking if the company structure actually suits your needs, company registration, to filing a Confirmation Statement and Corporation tax.

Beany - your easy business accountant

Need a helping hand? At Beany, we specialise in making accounting and tax a breeze. Our team of experts can handle your tax compliance so you can focus on what you do best – running your business. Let Beany be your trusted accounting partner. Get in touch with us or register today.

Charlotte Wass

General Manager, Beany UK

Chartered Accountant and Chartered Tax Adviser based in London. I love autumn, otters and Malteasers, and I hate spiders, peanut butter and the London Underground.

subscribe + learn

Beany Resources delivered straight to your inbox.