What is a limited company?

A limited company is a business that exists as its own legal entity — separate from the people who own and run it. That separation is the whole point, and it brings two big features:

• Limited liability. The company’s money is separate from your personal money. If the business runs into debt, your personal assets are generally protected — you only risk what you’ve put into the company.
• Its own identity. The company can own things, sign contracts, and keep trading even if the owners change. Its finances are kept completely separate from yours.

The trade-off is more admin. A limited company has more rules to follow than a sole trader — you file accounts publicly, you have legal duties as a director, and some of your details appear on a public register.

Limited company or sole trader?

It’s worth being clear on the difference before you commit:

• Sole trader — you and the business are the same thing. Simple to set up, less paperwork, but you’re personally responsible for any debts. You register with HMRC, not Companies House.
• Limited company — the business is separate from you. More protection and often seen as more credible, but more reporting and admin. You register with Companies House.

Many people start as a sole trader and switch to a limited company later as their income or risk grows. Neither is “better” — it depends on your situation, and it’s worth getting advice from an accountant if you’re unsure.

Before you start: the decisions to make

Have these sorted before you begin and the registration itself takes minutes.

Choose a company type

Most people set up a company “limited by shares” — the standard choice for businesses that aim to make a profit. “Limited by guarantee” is mainly used by charities and non-profits. This guide focuses on limited by shares.

Choose a company name

Your name must be unique — not the same as, or too similar to, an existing company. It normally has to end in “Limited” or “Ltd.” You can’t use offensive or “sensitive” words, or imply a government link without permission. Check availability with the Companies House name checker, and check the trademark register too. Your name appears on the public register and on all official paperwork.

Appoint directors (and optionally a secretary)

You need at least one director — a real person aged 16 or over who is legally responsible for running the company properly. You don’t have to appoint a company secretary, but you can. Directors’ names and dates of birth are public; home addresses are kept private if you provide a separate correspondence address.

Decide on shareholders and shares

You need at least one shareholder, who can be the same person as the director. You decide how many shares to issue and who holds them — a single person can own 100% of the shares. Many small companies simply issue one share worth £1.

Identify People with Significant Control (PSC)

You must identify anyone with significant control — typically anyone who holds more than 25% of the shares or voting rights. You confirm these people during registration, and they go on the public register.

Sort your registered office and SIC code

You need a registered office — a physical UK address where official mail is sent (this is public, and doesn’t have to be where you actually work). You’ll also pick a SIC code, a short standard code that describes what your business does.

Prepare your governing documents

Two documents set out how the company is run: the memorandum of association (a statement signed by the first shareholders agreeing to form the company) and the articles of association (the rules for running it). If you register online you can use standard “model articles”, which are created for you automatically.

New: you must verify your identity first

Identity verification is now a legal requirement. Before registering, each director and person with significant control must verify their identity through GOV.UK One Login. You only need to do this once, and you’ll get a unique personal code to use on the registration form.

This is one of the biggest recent changes to setting up a company, introduced to cut down on fraud. If a company has more than one director, you’ll need each director’s personal code before you can complete registration.

Step-by-step: how to register

The quickest and cheapest route is online, through the official Companies House service on GOV.UK.

Step 1 — Verify your identity.

If you haven’t already, verify your identity via GOV.UK One Login and get your personal code. Each director and PSC needs to do this.

Step 2 — Go to the official Companies House registration service.

Use the “Register your company” service on GOV.UK. Avoid paying a third-party site more than you need to — the official fee is just £100.

Step 3 — Create a Government Gateway account for the company.

You’ll set up a new Government Gateway user ID for the company itself — you can’t use your personal one.

Step 4 — Enter your company details.

Provide your company name, type (limited by shares), registered office address, and SIC code.

Step 5 — Add directors, shareholders and PSCs.

Enter the details for everyone involved, including their personal codes, and confirm who has significant control.

Step 6 — Confirm your documents and share structure.

Choose model articles (or upload your own) and set out your statement of capital — the number and value of shares.

Step 7 — Pay and submit.

Pay the £100 fee by debit or credit card and submit. You’ll usually be registered for Corporation Tax at the same time, unless the company is dormant.

Cost and timing

Online: £100, paid by debit or credit card, and your company is usually registered within 24 hours.

If you’d rather register by post, you can use form IN01. Postal applications take around 8 to 10 days and cost £124, paid by cheque to “Companies House.” You’d also need to register by post if you don’t want “limited” in your company name.

What happens after you register?

Once your application is accepted, you’ll receive a certificate of incorporation. This confirms the company legally exists and shows your company number and date of formation.

Companies House also tells HMRC about your new company, and you’ll be sent a 10-digit company Unique Taxpayer Reference (UTR) by post. You’ll need to add Corporation Tax services to your business tax account to manage your company’s tax.

If you’re employing anyone — including yourself as the only director taking a salary — you’ll also need to register for PAYE with HMRC.

Your ongoing responsibilities

Running a limited company comes with legal duties that continue every year. The main ones are:

• Annual accounts to Companies House. Every company, even a dormant one, files accounts. Your first set is usually due 21 months after incorporation; after that, normally 9 months after your financial year ends.
• A confirmation statement. Once a year you confirm that the company’s details on the register are still correct.
• A Company Tax Return and Corporation Tax. You report your profits to HMRC and pay Corporation Tax on them.
• Director duties and records. Directors must keep proper company and accounting records and run the business in line with the law and the company’s articles.

Missing these deadlines leads to automatic penalties, so it’s common to use an accountant to keep everything on track.

A note on VAT

Setting up a company doesn’t automatically mean you register for VAT. You must register for VAT if your taxable turnover goes above £90,000 in a 12-month period. You can also register voluntarily below that if it suits your business — some clients prefer dealing with VAT-registered companies. Always check GOV.UK for the current threshold, as it can change.

Quick FAQ

How much does it cost?

£100 to register online with Companies House, or £124 by post. There are no ongoing fees just to exist, but the confirmation statement and accounts must be filed each year.

How long does it take?

Online registrations are usually processed within 24 hours. Postal applications take around 8 to 10 days.

Can I be the only person in the company?

Yes. One person can be the sole director and sole shareholder. That’s very common for small businesses and contractors.

Do I need a business address that’s different from my home?

Not necessarily, but your registered office is public. Many people use an accountant’s address or a registered-office service to keep their home address off the public record.

Do I need an accountant?

It’s not legally required, but a limited company has real reporting obligations and tax rules, so many owners find an accountant well worth the cost.

What’s a dormant company?

A company that isn’t trading. It still has to file with Companies House, but it can tell HMRC it’s dormant for Corporation Tax purposes.

Official sources

This guide is based on official UK government information. Always check GOV.UK and Companies House for the latest rules, fees and thresholds, as these can change:

• UK — Set up a limited company: step by step
• UK — Register your company (Companies House)
• UK — Verify your identity for Companies House
• UK — Choose a company name and check availability
• UK — Running a limited company (directors’ responsibilities, accounts and records)
• HMRC — Corporation Tax and VAT registration

This article is for general information only and is not a substitute for professional legal, tax or accounting advice. If your situation is complex, consider speaking to an accountant or solicitor.