1. Introduction to Private Limited Companies
A private limited company (Ltd) is one of the most popular business structures in the UK. It provides legal separation between the business and its owners, meaning shareholders are only liable for the money they invest. Knowing how to set up private limited company is essential for entrepreneurs seeking credibility, financial protection, and growth.
2. Why Set Up a Private Limited Company?
- Limited Liability: Protects personal assets from business debts.
- Professional Image: Builds trust with clients and investors.
- Tax Efficiency: Potential savings compared to sole trader status.
- Investment Opportunities: Easier to attract funding.
- Continuity: Business continues even if ownership changes.
3. Steps to Set Up Private Limited Company in the UK
Step 1: Choose a Company Name
- Must be unique and not too similar to existing names.
- Check availability on Companies House WebCHeck.
- Avoid sensitive words unless approved.
Step 2: Decide on Directors and Shareholders
- At least one director is required (must be over 16).
- Shareholders own the company (can be the same as directors).
- Assign share percentages.
Step 3: Register the Company Address
- Must be a physical UK address.
- Can use your home address, office, or a virtual office.
Step 4: Prepare Company Documents
- Memorandum of Association: Confirms the company is being set up.
- Articles of Association: Rules for running the company.
Step 5: Register with Companies House
- Apply online (£12 fee) or by post (£40 fee).
- Provide company name, directors, shareholders, and business activities (SIC code).
- Once approved, you’ll receive a Certificate of Incorporation.
Step 6: Register for Corporation Tax
- Register with HMRC within 3 months of trading.
- Corporation tax currently set at 25% (2025 rate, depending on profits).
Step 7: Open a Business Bank Account
- Keeps finances separate.
- Most UK banks require company registration documents.
Step 8: Register for VAT (If Required)
- Mandatory if turnover exceeds £90,000 (2025 threshold).
- Voluntary registration available below this limit.
4. Ongoing Responsibilities of a Private Limited Company
- File annual accounts with Companies House.
- Submit corporation tax returns to HMRC.
- Maintain accurate financial records.
- File a confirmation statement annually to update company details.
5. Costs of Setting Up a Private Limited Company
- Online registration: £12.
- Postal registration: £40.
- Accountant fees: £300–£1,000+ annually (optional but recommended).
6. Advantages of a Private Limited Company
- Protects personal assets through limited liability.
- Professional and trustworthy business structure.
- More opportunities to raise investment.
- Tax efficiency compared to self-employment.
7. Disadvantages of a Private Limited Company
- More paperwork and admin.
- Public disclosure of company details.
- Directors must follow strict legal duties.
- Accounting and compliance costs.
Frequently Asked Questions
Q1: How long does it take to set up a private limited company?
Online applications are usually approved within 24 hours.
Q2: Can I set up a company on my own?
Yes, you can be the sole director and shareholder.
Q3: Do I need an accountant?
Not legally, but most limited companies hire one for tax efficiency and compliance.
Q4: What’s the difference between a limited company and sole trader?
A sole trader is personally liable for debts, while a limited company separates business and personal liability.
Q5: Do I need a business bank account?
Yes, it’s recommended (and required by most lenders) to keep finances separate.
Q6: Can I run my company from home?
Yes, you can use your home address as the registered office, though it will appear publicly.
Conclusion
Learning how to set up private limited company in the UK is straightforward with Companies House. By registering your business name, appointing directors, and filing the right documents, you gain legal protection, tax benefits, and credibility. While there are added responsibilities, the long-term advantages make it one of the best business structures for serious entrepreneurs in 2025.