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Limited company formation explained

When you run a UK-based business, there are several ways to structure your company. The most common structures are sole trader, limited companies, and public limited companies. This article is about limited companies (Ltds).

What is it?

A limited company is a simple structure. One person or a group of people can set up this type of company. This structure is popular because it is a way to limit your liabilities, should your business be sued or go bankrupt.

The way it works is that when a limited company is set up, the business owners invest a sum of money. If that sum is a total of £800, for example, should the business incur losses for whatever reason, the amount paid out to cover those losses cannot exceed £800.

Importantly, none of the business owner’s personal assets can be seized and used to cover the firm’s losses. In other words, the liability of the owners is limited to what they have invested into the business and any assets the business owns at the time of the issue.

Forming a limited company

To set up a company, you need to register it with Companies House. The brand name cannot be one that is already registered or being used by another firm.

Companies House provides a form (the INO1) for you to fill out. That form has to be accompanied by a Memorandum of Association and Articles of Association. These legal documents list the names and addresses of the people forming the company, and outline its purpose and the director’s powers, as well as the rights of any shareholders.

The easiest way to form a Ltd company

The application process is not complicated, but it has to be done accurately. Any mistakes made at the registration stage can cause serious issues later.

By far the easiest way to form a UK company is to ask an agent or accountant to do it for you. Not only are you guaranteed that the registration will be done correctly, it will also be done quickly. Most agents have the knowhow to get your registration done within a few hours.

There are other benefits too. The majority of agents and accountants offer a package of services as part of the registration process. These include help with opening a business bank account, accountancy services, and other extras that can help you to get your new business established.

Posted by Mark
June 10, 2015

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