Set up a Private Limited Company in the UK

Starting your own business in the UK can be exciting, especially if you’re considering setting up a private limited company. This type of company is popular among entrepreneurs, including those who aren’t UK residents.

In this blog post, we’ll guide you through the key steps and necessary information to set up a private limited company in the UK. From understanding the basic requirements to navigating the setup process, we’ve got you covered. Our comprehensive guide will make the entire process straightforward and manageable.

Let’s dive in and explore how you can make your mark in the UK business landscape! But, before moving on to the company setup process, let’s learn about the basics of private limited companies in the UK.

What Is a Private Limited Company?

A private limited company in the UK is a company structure where the company is legally distinct from its owners. This is the most famous structure among all limited company types.

In a private limited company, members are only responsible for the money they put into the business. Shares of the company are not traded publicly and are typically restricted in their transferability.

Types of Private Limited Companies

In the UK, private limited companies are categorized mainly into two types based on their structure and how shares are held and managed. These types are:

Private Company Limited by Shares (Ltd):

• This is the most common form of private limited company.
  
  
• The liability of the members (shareholders) is limited to the amount unpaid on shares they hold.
  
  
• It’s typically used for profit-making businesses.
  
  
• Shares in the company cannot be offered to the general public and are often transferred privately.
  
  
• It requires at least one director and one shareholder, and there’s no upper limit on the number of shareholders.

Private Company Limited by Guarantee:

• Instead of having shareholders and shares, the company has members who act as guarantors.
  
  
• The members’ liability is limited to a predetermined amount each member agrees to contribute to the company’s assets if it’s wound up.
  
  
• Commonly used by non-profit organizations, clubs, co-operatives, social enterprises, and some professional associations.
  
  
• These companies do not distribute profits to their members but reinvest them back into the business or use them for other purposes related to their objectives.
  
  
• Like limited-by-shares companies, they require at least one director, with no maximum number of members.

Both types must adhere to similar compliance and reporting requirements, including registration with Companies House, annual filing of accounts, and tax obligations. The choice between the two depends largely on the nature and objectives of the business.

Who Can Form a Private Limited Company?

You may wonder whether you can form a private limited company in the UK. Here is your answer: In the UK, almost anyone can open a private limited company, subject to certain conditions.

Take a look below to learn about these conditions:

• Age: Your age must be at least 16 years old.
  
  
• Nationality: There are no nationality or residency restrictions for directors or shareholders. This means non-UK residents can set up a private limited company in the UK.
  
  
• Number of People: At least one director and one shareholder are required. The same person can be both the director and the shareholder.
  
  
• Legal Capacity: The person must not be disqualified from acting as a company director. This includes people who are ineligible due to a court order or who have an unresolved bankruptcy.
  
  
• Registered Address: The company must have a registered physical address in the UK. This address will be used for all official communications and public records.
  
  
• Unique Company Name: The proposed company name must be unique and not too similar to any existing company’s name. It also must not contain any sensitive words or expressions unless permitted.

These conditions make it relatively straightforward for individuals, whether UK residents or non-residents, to set up a private limited company, provided they meet the legal requirements and are prepared to fulfill the ongoing responsibilities of running a company.

Things to Consider Before Setting up a Private Limited Company

Before setting up a private limited company in the UK, there are several important factors to consider to ensure that this business structure aligns with your goals and capabilities:

• Business Purpose and Viability: Evaluate your business’s purpose and ensure a viable market for your product or service. A clear business plan can help with this assessment.
  
  
• Avoid Mistakes: Some common mistakes could appear when setting up a private company in the UK. You should avoid those mistakes and prepare yourself to complete the entire formation process with proper compliance. If it seems like a hassle for you, don’t worry; Business Globalizer is here to help.
  
  
• Financial Commitment: Consider the costs of setting up and running a company, including registration fees, accounting and legal services, insurance, and ongoing administrative expenses.
  
  
• Legal Obligations and Compliance: Understand the legal requirements, including registration with Companies House, compliance with tax obligations, and filing annual accounts and confirmation statements.
  
  
• Limited Liability: While limited liability protects your personal assets, it also comes with responsibilities. Ensure you understand the implications of limited liability for shareholders and directors.
  
  
• Control and Ownership Structure: Decide on the company’s ownership and management structure. This includes appointing directors and allocating shares to shareholders.
  
  
• Taxation: Understand how a private limited company is taxed, including corporation tax, VAT, PAYE, and national insurance contributions. This is different from personal taxation and can have significant financial implications.
  
  
• Record-Keeping and Reporting: You must keep strict records and regularly report your finances, which are more demanding than sole traders or partnerships.
  
  
• Banking and Finances: Setting up a separate business bank account and arranging finances for initial business operations are essential.
  
  
• Exit Strategy: Consider your long-term goals and an exit strategy for the business. This includes understanding how to transfer ownership or dissolve the company if necessary.
  
  
• Professional Advice: It’s advisable to seek legal and financial advice to navigate the complexities of setting up a private limited company, ensuring you make informed decisions.
  
  
• Market Research and Strategy: Conduct thorough market research and develop a solid marketing strategy to establish and grow your business presence.

By carefully considering these aspects, you can make a more informed decision about whether forming a private limited company is the right choice for your business venture.

Required Documents for Setting up a Private Limited Company for Non-Residents

Building on the considerations for setting up a private limited company, non-residents planning to establish such a company in the United Kingdom must be aware of specific documentation requirements. Here are the essential documents that non-residents need to set up a private limited company in the UK:

• Passport’s Scanned Copy: Non-resident directors and shareholders must provide identification, such as a passport’s scanned copy.
  
  
• Proof of Address: You must provide proof of identity and address for all shareholders and directors, such as passports, driving licenses, or utility bills, typically dated within the last three months.
  
  
• Registered Office Address in the UK: Even for non-residents, the company needs a physical registered office address from a formation agent or a law firm in the UK. A registered office address is where official documents can be sent.
  
  
• Memorandum of Association: A Memorandum of Association is a written agreement to form the company that all initial shareholders or guarantors sign.
  
  
• Articles of Association: The Articles of Association outline the rules for running the company, agreed upon by the directors, shareholders, and the company secretary.
  
  
• Form IN01: This is the application to register a private limited company with Companies House. This form asks about:
  
  • The company’s name.
  • Types of business.
  • Registered office address.
  • Principle business activities.
  • Details about directors and shareholders.
  • Details about the company secretary.
  • Statement of share capital.
  • And details about legal entities such as People with Significant Control (PSC).
    
    
• Details of Directors and Shareholders: This includes the full names, dates of birth, nationalities, and addresses of the company’s directors and shareholders.
  
  
• Standard Industrial Classification (SIC) Code: Determine and register the primary business activity using the appropriate SIC code.

The required documents for setting up a private limited company for non-residents can vary depending on the specific jurisdiction you choose. Understanding and compiling these documents is crucial for a smooth registration process with Companies House and ensuring legal compliance for their UK-based private limited company.

Key Steps for Setting Up a Private Limited Company in the UK for Non-resident

We have already discussed the necessary documents for non-residents to set up a private limited company in the UK. Let’s now look at the simple steps to start your company. This is the next part of your journey after getting all your documents ready:

• Choose a Company Name: Select a unique company name that complies with UK naming regulations. Before deciding on the name, you should review the different rules related to the limited company’s name and ensure compliance with the Companies Act, 2006.
  
  Also, you must check the availability of your chosen name. The name should not be similar to any existing limited company and must end with “Limited” or “Ltd.”
  
  
• Get the Registered Office Address: This is where official communications will be sent. You can get the service address from a UK company formation agent like Business Globalizer.
  
  
• Choose Directors and Shareholders: You need at least one director and shareholder for your private limited company. Non-residents can hold these positions. A director and a shareholder can both be the same person.
  
  
• Identify PSC: PSC means people with significant control over the company. In this step, list and declare individuals with significant control or influence over the company, like those holding more than 25% of shares or voting rights.
  
  
• Prepare Documents:
  • Create a Memorandum of Association, a legal statement by the initial shareholders agreeing to form the company.
    
    
  • Draft the Articles of Association, outlining the company’s rules.
    
    
• Check What Records You’ll Need to Keep: In this step, plan for maintaining detailed records, including financial statements, a record of shareholders, contracts, and decisions made by your private limited company.
  
  
• Register with Companies House: Continuing the focus on the necessary steps for non-residents to set up a private limited company in the UK, it’s time to register your company with Companies House.

How do I Register a Ltd Company in the UK with Companies House?

Once you are prepared with all the necessary documents, it’s time to apply for registration. When registering a private limited company in the UK, the first step is to complete the IN01 form or register through the Government Gateway using a user ID and password. Both methods achieve the same outcome of registering your company with Companies House.

• Create a Government Gateway User ID and Password: You will need to create a user ID and password for your private limited company before you can start the registration process. You can use this online platform to register your company electronically.
  
  Once you have created your account, you can complete the registration form online with Companies House and pay the registration fee electronically. Alternatively, you can register by post, physically mailing the IN01 form and other documents.
  
  
• Fill out the IN01 Form: You must complete the IN01 form to apply for registering your company with Companies House. You can download this paper form from the Companies House website. After completion, send this form and other necessary documents to Companies House, either online or by post.

Please remember that you can create a Government Gateway account after submitting your IN01 form. This is required to access and manage your company’s information on the Companies House website.

Therefore, it’s not a matter of which is done first but rather a choice you make as the applicant. One of the following methods should be effective for you:

• If you choose the IN01 form, completing it will be the first step.
  
  
• If you choose the Government Gateway, registering for a user ID and password will be the first step.
  
  
• Also, you can use the company formation service, including registering your private limited company with Business Globalizer, to reduce your hassle and comply with the rules and regulations of HMRC and Companies House.

Completing these steps will lead to the formal establishment of your private limited company. Companies House will verify and process your application. Once your application is approved, it will issue a certificate of incorporation. This is your company’s birth certificate, confirming its existence and showing its company number and formation date.

What Else Must Be Done after I Set Up a Private Limited Company in the UK?

After successfully setting up a private limited company in the UK, there are several essential steps you need to take to ensure your company operates smoothly and remains compliant with legal requirements:

• Register for Corporation Tax: You must register with HM Revenue & Customs (HMRC) for Corporation Tax within three months of starting the business.
  
  
• Set Up a Business Bank Account: Open a dedicated bank account in your company’s name. This is essential for keeping your personal finances separate from your business transactions.
  
  
• Keep Accurate Records: Maintain detailed records of your company’s finances, including all income, expenses, and bank transactions. You also need to keep records about the company itself, such as details of directors, shareholders, and company secretaries.
  
  
• File Annual Accounts and Confirmation Statement: Submit annual accounts to Companies House and HMRC. Also, file a yearly confirmation statement with Companies House. It confirms that they hold accurate information about your company to renew it.
  
  
• Register for VAT: If your limited company’s turnover exceeds the VAT threshold, you must register for VAT. This threshold may change yearly. You can also voluntarily register for VAT if it benefits your business.
  
  
• Payroll and PAYE: If you employ staff, set up a payroll system and register for PAYE with HMRC to collect income tax and national insurance contributions.
  
  
• Understand Employment Responsibilities: If you’re employing people, ensure you understand and adhere to employment law, including providing employment contracts, paying at least the minimum wage, and enrolling eligible staff in a workplace pension scheme.
  
  
• Stay Updated on Legal Obligations: Regularly review and stay updated on legal obligations related to running a private limited company, including changes in UK corporate tax laws, employment laws, and company law.

Completing these tasks will help keep your company in good standing and protect you from potential legal issues. It’s always advisable to seek professional advice to ensure all legal and financial responsibilities are fully met.

How can Business Globalizer Help You Set up a Private Limited Company in the UK?

Business Globalizer has three packages to form your company in the UK, including various services. Our one-stop solution includes company formation (USA, UK), VAT, tax registration, payment gateway, business tax preparation, and tax submission. No matter where you are on the map, you can avail of our service with a few clicks. We will ensure your company is legally registered with Companies House.

FAQs

Q1: Can I set up a new private limited company by myself?

Answer: You can set up a new private limited company in the UK. However, it can be a complex process involving various legal and administrative tasks. It’s wise to hire a company formation agency.

Q2: How much does setting up a private limited company in the UK cost?

Answer: It depends on the process you choose to set up your private limited company in the UK. At Business Globalizer, we have three packages: Basic, Standard, and Premium. Kindly check out our services. You may select any of these packages based on your needs.

Q3: What if I don’t want to run my LTD company anymore?

Answer: There can come a time when you may no longer want to run your LTD company in the UK. At this time, you may have several options to consider:

• Sell your company.
• Put your company into dormancy.
• Dissolve the company; you can do this by taking service from Business Globalizer.

Also, this can be a good option if you want to step back from the day-to-day running of the business but retain ownership. But for this, you must choose someone trustworthy and eligible to take over as director.

Bottom Line

In conclusion, while there are numerous benefits to setting up a private limited company, responsibilities, and administrative requirements are also involved. This includes filing accounts with Companies House, regular financial reporting, compliance with company law, or measuring the higher administrative costs.

Consulting with legal and financial professionals can help you set up a private limited company in the UK as a non-resident based on your business goals and circumstances.