How to Set Up a Limited Company in the UK: Step by Step

Introduction

Forming a limited company is one of the most popular ways to structure a business in the United Kingdom. A limited company is a separate legal entity from its owners (known as shareholders), which means the company itself can own property, enter into contracts, and is liable for its own debts. The key advantage for you as a business owner is limited liability — your personal assets are protected if the business runs into financial difficulty, as your liability is typically limited to the amount you have invested in the company.

There are two main types of limited company in the UK. A private company limited by shares (Ltd) is the most common structure, where the company is owned by shareholders and limited by the value of shares they hold. A private company limited by guarantee is typically used by non-profit organisations and social enterprises, where members guarantee a nominal amount rather than holding shares. This guide focuses primarily on the limited by shares structure, as it is the standard choice for the vast majority of commercial businesses.

Beyond limited liability, incorporating offers several other benefits: enhanced credibility with clients and suppliers, potential tax efficiencies (corporation tax is often lower than personal income tax rates for higher earners), greater flexibility in how you extract profits, and the ability to bring in investors through share issuance. However, it also comes with increased administrative responsibilities, including annual filings with Companies House and maintaining statutory records.

This guide walks you through every stage of the process, from the initial planning decisions through to your post-registration obligations, so you can set up your company with confidence.

Step 1: Choose Your Company Name

Your company name is the first thing clients, customers, and partners will see, so it is worth taking the time to get it right. Beyond branding considerations, there are strict legal rules governing what you can and cannot call your limited company.

Legal Requirements

Your name must end with "Limited" or "Ltd" (or the Welsh equivalents "Cyfyngedig" or "Cyf" if registered in Wales). It must not be identical to or too similar to an existing company on the Companies House register — you can check availability for free using the Companies House name availability checker. Certain words and expressions are considered "sensitive" and require special approval before you can use them. These include words that suggest a connection with government or local authorities (such as "Royal", "Parliament", or "Council"), regulated professions (such as "Bank", "Insurance", or "Charity"), and certain other terms that could mislead the public.

Practical Considerations

Think carefully about whether your chosen name works well as a web domain, as a social media handle, and across all the channels you plan to use. Check that the matching .co.uk and .com domains are available. Consider whether the name is easy to spell, easy to pronounce, and memorable. Avoid names that are so generic they will be difficult to build brand recognition around, but equally avoid names so obscure that potential clients cannot find you. It is also worth checking the UK Intellectual Property Office's trade mark register to ensure your proposed name does not infringe on an existing trade mark, even if it is technically available at Companies House.

Step 2: Appoint Directors and a Company Secretary

Every limited company must have at least one director who is a natural person (i.e., a real individual, not another company). Directors are legally responsible for running the company and ensuring it complies with the Companies Act 2006 and other relevant legislation. Their duties include promoting the success of the company, exercising independent judgment, avoiding conflicts of interest, and maintaining accurate company records.

There is no upper limit on the number of directors you can appoint. In practice, many small businesses start with just one or two. Each director must be at least 16 years old and must not be disqualified from acting as a director. Their details — including full name, date of birth, nationality, occupation, and a service address — will be filed with Companies House and appear on the public register.

Appointing a company secretary is optional for private limited companies. However, many businesses choose to appoint one to handle the administrative burden of statutory filings, maintaining registers, and ensuring compliance deadlines are met. If you do not appoint a company secretary, these responsibilities fall to the directors.

Step 3: Decide on Shareholders and Share Structure

A company limited by shares must have at least one shareholder. In many small businesses, the directors and shareholders are the same people, but this does not have to be the case. When you form your company, you will need to issue at least one share. The most common approach for a simple startup is to issue a single class of ordinary shares with a nominal value of £1 each.

The nominal value (or par value) of a share is the minimum price at which it can be issued. This is not necessarily the same as the share's market value. For example, you might issue 100 ordinary shares at £1 each, giving the company an initial share capital of £100. This is the amount each shareholder has agreed to invest and represents the limit of their financial liability.

If you are setting up with co-founders or investors, you will need to think carefully about how shares are divided. The percentage of shares a person holds determines their voting power and their entitlement to dividends. If you anticipate bringing in investors later, consider creating different share classes (such as ordinary and preference shares) to allow for different rights regarding dividends, voting, and capital distribution.

You must also identify every Person of Significant Control (PSC) — anyone who holds more than 25% of shares or voting rights, or who otherwise has significant influence or control over the company. PSC information must be filed with Companies House and kept up to date.

Step 4: Choose Your Registered Office Address

Every UK limited company must have a registered office address. This is the official address where legal documents, government correspondence, and communications from Companies House and HMRC will be sent. It must be a physical address located in the same country (England & Wales, Scotland, or Northern Ireland) where the company is registered — a PO Box is not acceptable.

Your registered office address will appear on the public record at Companies House, on all official company communications, and on your website. For this reason, many business owners prefer not to use their home address, both for privacy reasons and to maintain a professional image. A registered office service is a popular and affordable alternative, providing you with a recognised business address that handles your official post and forwards it to you.

Keep in mind that your registered office does not need to be the same as your trading address or the place where you actually carry out your day-to-day business. However, you must be able to receive and deal with correspondence sent there in a timely manner, as missing important statutory mail can have serious consequences.

Step 5: Prepare Your Memorandum and Articles of Association

These are the two constitutional documents that every limited company must have. Together, they define how your company is governed and how it will operate.

Memorandum of Association

The memorandum is a short legal statement signed by all initial subscribers (the founding shareholders) confirming their intention to form a company and agreeing to become members. Since the Companies Act 2006, the memorandum is a relatively simple document and does not need to include the company's objects or powers, as it did under previous legislation.

Articles of Association

The articles are a far more detailed document setting out the rules by which the company will be run. They cover matters such as the powers of directors, procedures for board meetings and shareholder meetings, the process for issuing and transferring shares, dividend distribution, and how decisions are made. Companies House provides a set of Model Articles which are suitable for most small to medium-sized businesses and are used by default if you do not file your own bespoke articles. However, if your business has specific requirements — such as different classes of shares, tag-along and drag-along provisions, or restrictions on share transfers — you may want to draft tailored articles with the help of a solicitor.

Step 6: Register Your Company with Companies House

Once you have made all the decisions outlined above, you are ready to formally incorporate your company. You can register online through the Companies House web incorporation service, which is the quickest and cheapest method, or you can submit a paper application using Form IN01.

Registration Methods at a Glance

These fees are correct as of February 2026, following the fee changes introduced by Companies House on 1 February 2026. Digital filing is strongly encouraged and significantly cheaper than paper. Companies House reviews its fees annually, so always check the latest schedule before submitting.

As of November 2025, Companies House also requires mandatory identity verification for all new directors, PSCs, and LLP members at the point of appointment. Existing officeholders have until 18 November 2026 to complete verification through Gov.uk One Login or an Authorised Corporate Service Provider (ACSP). This is an important additional step to factor into your formation timeline.

When registering, you will need to provide the company name, registered office address, details of all directors (and company secretary if applicable), details of all shareholders and their shareholdings, details of Persons of Significant Control, the memorandum of association, and the articles of association (unless you are adopting the Model Articles). You will also need to provide a SIC code — a five-digit number that classifies your company's industry and business activity.

Once Companies House has processed your application successfully, you will receive a Certificate of Incorporation. This confirms your company's legal existence, its registered number, and the date of incorporation. From this point forward, your company is a separate legal entity.

Step 7: Register for Tax with HMRC

Within three months of starting to trade, you must register your company for Corporation Tax with HM Revenue & Customs (HMRC). In many cases, HMRC will send you a letter shortly after incorporation prompting you to register. You can register online through the HMRC website, and you will need your company's Unique Taxpayer Reference (UTR), which HMRC sends automatically after Companies House notifies them of your incorporation.

Corporation Tax

Your company must pay Corporation Tax on all taxable profits, including trading profits, investment income, and chargeable gains. You are required to file a Company Tax Return (CT600) and pay any tax due within nine months and one day of the end of your accounting period. The tax return itself must be filed within 12 months.

VAT Registration

You must register for VAT if your taxable turnover exceeds the VAT threshold (which you should verify at the current HMRC rate, as it is subject to change). You can also register voluntarily if your turnover is below the threshold, which can be beneficial if most of your customers are VAT-registered businesses, as it allows you to reclaim VAT on your purchases. Once registered, you must charge VAT on applicable goods and services, submit VAT returns (usually quarterly), and keep detailed VAT records.

PAYE and Payroll

If you plan to employ staff — or if you intend to pay yourself a salary as a director — you will need to register as an employer with HMRC and set up a PAYE (Pay As You Earn) scheme. This requires you to operate payroll, deduct income tax and National Insurance contributions from employees' wages, and report these to HMRC through Real Time Information (RTI) submissions each pay period. You must also set up a workplace pension scheme and automatically enrol eligible employees.

Step 8: Set Up Your Business Bank Account

Although not a legal requirement, opening a dedicated business bank account is strongly recommended and is considered essential best practice. A limited company is a separate legal entity, and mixing personal and business finances can create accounting headaches, complicate your tax affairs, and potentially undermine the limited liability protection the company structure provides.

When choosing a business bank account, compare fees, features, and the quality of online and mobile banking. Many high-street banks and digital challenger banks offer business accounts, some with free banking for an introductory period. You will typically need your Certificate of Incorporation, identification for all directors and significant shareholders, and proof of your registered office address to open the account.

Step 9: Understand Your Ongoing Compliance Obligations

Running a limited company comes with ongoing legal and administrative responsibilities. Failing to meet these can result in fines, penalties, and even the company being struck off the register.

Annual Filings

You must file a Confirmation Statement with Companies House at least once every 12 months. This confirms that the information Companies House holds about your company is accurate and up to date, including details of directors, shareholders, registered office, SIC codes, and PSCs. You must also prepare and file annual accounts with Companies House. The level of detail required depends on the size of your company — micro-entities and small companies can file abbreviated or filleted accounts.

Statutory Records

Your company must maintain a set of statutory registers, including a register of members (shareholders), a register of directors, a register of directors' residential addresses, a register of secretaries (if applicable), a register of charges, and a PSC register. You must also keep records of all board minutes, shareholder resolutions, and any changes to the company's officers or constitutional documents.

Key Deadlines

Missing deadlines can result in automatic penalties. Your annual accounts must be filed with Companies House within nine months of your financial year-end. Your Corporation Tax return must be filed within 12 months. Corporation Tax must be paid within nine months and one day. Changes to company details (such as a change of director or registered office) must generally be notified to Companies House within 14 days.

Step 10: Consider Professional Support

While it is entirely possible to set up and run a limited company yourself, many business owners find it valuable to engage professional support, particularly in the early stages. An accountant can help you set up your bookkeeping systems, advise on the most tax-efficient way to extract profits (through a combination of salary and dividends, for example), prepare your annual accounts, and file your tax returns. A solicitor can help draft bespoke articles of association, shareholder agreements, and employment contracts. A formation agent can handle the entire incorporation process for you, often within a matter of hours.

The cost of professional advice is generally modest compared to the peace of mind and time savings it provides, and it can help you avoid costly mistakes in the early stages of your business.

Quick Reference Checklist

Use this checklist to track your progress through the incorporation process:

• Choose and check availability of your company name
• Appoint at least one director (natural person, aged 16+)
• Decide on shareholders and share structure
• Identify all Persons of Significant Control (PSCs)
• Select your registered office address
• Prepare or adopt your Memorandum and Articles of Association
• Register the company with Companies House (£100 online)
• Complete mandatory identity verification for all directors and PSCs
• Receive your Certificate of Incorporation
• Register for Corporation Tax with HMRC (within 3 months of trading)
• Register for VAT if applicable
• Register as an employer and set up PAYE if paying salaries
• Open a business bank account
• Set up accounting and bookkeeping systems
• Note all key filing deadlines in your calendar
• Set up a workplace pension scheme if employing staff