Setting Up A Limited Company in The UK

If you're considering forming a limited company in the UK and are unsure how to proceed, Icon Offices can assist you. As the UK's best-authorized agent for company formation with a 5-star Google rating, we are here to help. Contact Us for more information.

The process of bringing your UK business plan from paper to reality entails choosing the right company structure and navigating through the legal and regulatory requirements which often leave many budding entrepreneurs scratching their heads.

Indeed, when it comes to forming a UK company, there are certainly a few different company structures available, and understanding the benefits and disadvantages of each is key to ensuring its suitability to your future business plans.

In this article, we will explore different business structures in the UK, their pros and cons, and the process of incorporating your company.

What Types of Companies are there in the UK?

There are various sorts of company entities that can be created in the United Kingdom.

Sole proprietorship

For self-employed individuals, establishing a business as a Sole Trader can allow you to retain full control of your business whilst providing a quick and low-cost option to set up.

Partnership

Similarly, establishing a Partnership with another business owner can also offer a company structure that is easy to manage, and operate as well as provide further opportunities to raise finance.

However, sole proprietorship and partnership do not protect against business failure, meaning business owners, both individual and partners, have full liability and responsibility for any financial losses or debt the business may owe.

In the case of Partnerships, disagreements between partners can also lead to problems about how ownership and profits may be shared.

Limited Liability Partnerships (LLP)

Limited Liability Partnerships (LLP) offer a degree of protection to partners wishing to set up a business together by limiting their liability to the amount they have invested already into the businesses or personally guaranteed through loan agreements.

While this certainly provides an extra level of security to business owners, the partners of LLPs are required to disclose their income and the business may be struck off if they do not start trading within one year from registration.

Limited company

A limited company is a private company that is incorporated and limited by shares. This means that the company has shareholders and the liability of the shareholders to creditors of the company is limited to any money they originally invested.

The main benefit of a limited company is that it protects the individual if the business ever has financial troubles.

What are the advantages of forming a limited company?

One of the most popular and practical ways of forming a UK company is to set up a Limited Company. As with limited companies offer business owners the security that their finances are separated from and protected if the company should fail or owe debt.

Furthermore, as it can be set up by just one shareholder or director with no minimum capital requirements, it offers a relatively quick and simplistic means to get your business off the ground.

It is also worth noting that setting up a UK limited company is not only restricted to local UK residents but could also bring significant benefits for overseas residents and business entities alike.

For example, having a local presence not only presents easier access to UK and European markets, but consumer confidence surveys have also shown that people have increased confidence in brands and companies which have a local presence and so is a key factor in improving local marketing and sales.

What’s more, the process of setting up a UK limited company for non-UK residents is highly accessible and can be done remotely without the need to visit the UK or sign any documents and there are no overly challenging requirements.

What are the disadvantages of forming a limited company?

However, that’s not to say that setting up a UK-limited company comes complete without complications. Non-UK residents should be aware of their local country tax laws as well as any relevant double taxation agreements currently valid between the UK and their home country.

Dividend payments and capital gains, for example, may be deemed taxable in both the UK as well as the country of residence so calculating the correct legal tax liabilities in both countries will most likely require the support of both UK and local accountants.

For Chinese, Pakistani, and Indian nationals, for example, whose home country tax regimes differ significantly from the UK’s, navigating international tax treaty rules and regulations can be particularly complicated, and professional support may amount to a considerable cost.

There are also several logistical challenges that new businesses will need to consider. For instance, UK companies with an overseas director may struggle to open a local UK business bank account, which often requires UK residency as a prerequisite.

In addition, new business start-ups and entrepreneurs will require a local UK address to which they can receive any official company mail. Fortunately, however, many virtual office service providers are now able to support these areas.

For example, Icon Offices provide virtual office addresses for company registration purposes, mail scan and forwarding services as well as support in opening UK bank accounts.

What’s more, with packages starting from just £0.99 per week, Icon Offices can provide a significantly cheaper option than hiring local administrative staff or renting a physical office space.

What is the process of forming a UK Ltd Company?

With this in mind, it may also be beneficial and cost-effective to engage in a virtual office provider for many other aspects of your UK company formation.

For example, an application to form a UK limited company first requires registration with the Companies House, paying a registration fee as well as the number of forms and documents to be filed and submitted.

Companies should then receive a Certificate of Incorporation, Share Certificate, Memorandum & Articles of Association as well a Company Register with first entries usually within 24 to 48 hours of their application being approved.

Indeed, many virtual office service providers now offer full UK company formation packages and provide advice throughout the process.

For instance, for a flat fee of just £43.99 inc VAT Icon Offices can ensure that your application is submitted accurately so that it increases its chances of being approved.

In addition, Icon Offices also offers free support and assistance in opening a UK bank account, including a cash-back offer if your application is granted.

Forming a UK limited company also requires registering a UK company address as well as a correspondence address for directors and people within the company who hold significant control.

For those who do not yet have a company trading address, registering your company at a UK virtual office address can also be used, it can also help you in protecting your privacy.

What are the regulatory requirements for limited companies in the UK?

For those unfamiliar with the UK business landscape, it is also important to understand and ensure all UK company regulatory requirements are met in full and on time.

Key regulatory requirements include filing an annual confirmation statement (annual return) with Companies House, submitting your company’s annual accounts to Companies House as well as paying the necessary due income and corporation taxes to HMRC.

To ensure legal compliance and prevent unnecessary fines for late or incorrect submissions, business owners are advised to employ a UK Chartered Accountant with knowledge and experience in this area.

If the costs of hiring an accountant, however, are too high for your new business start-ups, some agents or virtual office providers can offer flexible and cost-effective alternatives.

For example, for an affordable price, Icon Offices provides annual tax filing, and annual confirmation statement filing, as well as support and guidance in general business tax planning, and VAT.

Whichever company structure you end up choosing for your business idea, it is worth bearing in mind the benefits and pitfalls of each. To keep costs low and get your business off the ground quickly, engaging with a virtual office provider can ensure your UK company formation is completed legally and correctly. Furthermore, with local expertise, guidance, and several additional services available under one roof, it may just well be the perfect business partner you need to help you grow.

Need help to incorporate your UK Limited Company? Contact us at [email protected] to help you navigate the process.