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December 24, 2007
When starting a business, a large number of people go down the route of forming a limited company or, to give it its full title, a limited liability company.
The alternative for someone starting up in business on their own is to trade as a sole-trader. There is less formal paperwork involved in going into business as a sole-trader, but a limited company can offer a number of advantages. These include greater opportunities to reduce the amount of tax your business pays, and increased protection of your personal assets in the event of the business running into problems.
This article explains how a limited company is structured, and details the steps you need to take to form your own limited company.
The first thing you will need to do is to decide on a name for your new limited company. Companies House maintains a list of all companies registered in the UK, and you can use their website to check if the name you want is available or whether it is already in use by another company.
Whatever name you opt for will have to have the word “limited” (often abbreviated to Ltd) at the end. So if, for example, your wanted to call your new business “The Ultimate Widget Company” then the full name of your limited company would be The Ultimate Widget Company Limited or The Ultimate Widget Company Ltd.
Your new company will need at least two people to act as officers of the company. One of these people will be the company secretary. The other person will be a director of the company. If you wish, the company secretary can be a director as well, but he/she cannot be the sole director.
The company secretary has certain legal responsibilities such as ensuring that the company submits annual returns to Companies House and that the company and its directors operate within the law.
Many people going into business on their own choose their spouse or another family member to fulfil the role of company secretary. Where two or more people are forming a limited company, one of them will often take on the job of company secretary in addition to being one of the directors of the company.
An alternative is to use the services of a third party firm who provide company secretary services to your business in return for an annual fee.
The next thing to decide is how you will allocate shares in your new company. You will need to specify how many shares your company has and the value of them. Typically, companies are formed with 100 or 1000 shares with a value of
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