How to set up a limited company in the UK | Simple guide

Published Thursday 27 November 2025

Table of contents

• What is a limited company?
• Why set up a limited company?
• What does it cost to register a limited company?
• Registration methods: online, postal, or using an agent
• How to set up a limited company
• Identity verification requirements
• How long does it take to set up as a limited company?
• What are the legal responsibilities of a limited company?
• What to do immediately after registration
• Getting your limited company up and running
• FAQs on setting up a limited company

Key takeaways

• Choose your company name carefully by checking availability on the UK government's website, searching for existing trademarks, and ensuring it ends with 'Ltd' or 'Limited' to avoid conflicts and legal issues.

• Register your limited company online through Companies House for £12 to complete the process within 24 hours, which is both the fastest and most cost-effective method compared to postal registration.

• Prepare essential company documents including memorandum of association and articles of association, while appointing at least one director and identifying people with significant control (PSCs) who own 25% or more of the company.

• Set up proper business infrastructure immediately after registration by opening a separate business bank account, registering for Corporation Tax within three months, and establishing accurate accounting record systems from day one.

What is a limited company?

A limited company is a separate legal entity from its owners that limits personal liability for business debts.

There are two main types:

• Limited by shares: For profit-making businesses where owners hold shares and can keep profits after paying corporation tax
• Limited by guarantee: For not-for-profit organisations where guarantors reinvest all profits back into the company

Key benefits: Your personal finances stay separate from the business, and your liability is limited to your investment amount.

A limited company by guarantee is similar to a limited by shares company. In both, you are legally separate from your company and have independent finances. A company limited by guarantee is usually a not-for-profit. Guarantors reinvest all profits back into the company. If the company pays profits to owners, it cannot apply for charitable status.

When setting up your limited company, you'll also need to figure out if it'll be a private limited company (Ltd) or a public limited company (PLC). The main difference between the two is a PLC's shares are traded publicly on the stock market whereas an Ltd is private. Another key difference is that PLCs must have two directors whereas an Ltd only has to have one.

Private limited companies (Ltd) are privately owned and cannot sell shares to the public. Examples include local retailers, consultancies, and small businesses.

Public limited companies (PLCs) can sell shares on the stock market and typically include large organisations like chain stores or major corporations.

What's the difference between a limited company, a partnership, an LLP & sole trader?

Before you set up a limited company, consider other business structures to see which suits your needs.

A limited liability partnership (LLP) is a business run by two or more people. The partners are not personally liable for business debts. Their liability (as suggested by the name) is limited to the amount they invest in the business, and all profit shares and responsibilities are set out in an LLP agreement. They're individually responsible for paying the tax on their share of the income as if they were self-employed.

A general partnership is similar, though slightly different, to an LLP. Profits are shared between the partners and they're also individually responsible for paying their tax. They won't have an LLP agreement in place however and the partners are legally liable for the debts and obligations of the partnership. The partnership isn't a separate legal entity from the individuals.

A sole trader (or sole proprietor) in comparison tends to be a single owner who is self-employed and often working by themselves (although they can technically employ people). Sole traders are solely responsible for their own business and debts, and there isn't a distinction between the person and their business; this structure is also likely not the most tax-efficient for businesses with a turnover of over £50,000.

Why set up a limited company?

Setting up a limited company provides several key advantages for business owners:

• Limited liability protection: Your personal assets are protected from business debts and legal costs
• Tax efficiency: Corporation tax rates may be lower than personal income tax rates for sole traders
• Professional credibility: Protected company name and formal business structure
• Investment opportunities: Ability to sell shares and access business-specific financing
• Employee incentives: Option to offer staff shares in the company

When you set up a limited company, your company name is protected. Other businesses cannot use the same or a similar name.

You can offer employees shares in your company, which may increase motivation and loyalty. As a shareholder, you may also receive dividends if your company makes a profit.

You have more ways to raise money as a limited company. You can sell shares to new investors and apply for loans available only to incorporated businesses.

These extras available to limited companies also bring some added complexity. Whereas sole traders and partnerships have simpler structures and taxing systems, limited companies need to gather more detailed accounting data for each tax year, with records for private companies needing to be preserved for a minimum of three years under the Companies Act.

Setting up a limited company may also cost more as you might need legal input to ensure your business structures are legally sound.

If you run a private limited company, you cannot sell shares to the public. Some company information is also available to the public.

Talk to an accountant to see if setting up a limited company is right for your business. Find a bookkeeper or accountant near you.

What does it cost to register a limited company?

Limited company registration costs vary by method:

• Online registration: £12 (cheapest and fastest option)
• Postal registration: £40
• Same-day registration: £100 (online only)

Check the latest fees on the UK government's website as they may change.

Registration methods: online, postal, or using an agent

When you are ready to register your company, choose the method that suits you best.

• Register online with Companies House: This is the fastest and most common method. The online process guides you through each step, and your company can be registered in as little as 24 hours.
• Register by post: If you prefer a paper-based approach, you can register by post. This involves filling out and sending specific forms. It's a slower process, typically taking 8 to 10 days.
• Use a company formation agent: These are third-party services that handle the registration process for you. They can offer additional services like a registered office address and help ensure your application is correct, which can be helpful if you're unsure about any of the steps.

How to set up a limited company

Setting up a limited company involves seven key steps that can be completed online in as little as 24 hours. Here's what you need to do:

1. Choose your company name

Follow these requirements when choosing your company name.

• Check availability: Use the UK government's website to verify the name isn't taken
• Search trademarks: Check for existing trade marks to avoid conflicts
• Add the suffix: End your name with 'Ltd' or 'Limited'
• Avoid similarity: Don't choose names too similar to existing companies

2. Appoint directors and company secretary

Your company has to have at least one director. This person will be legally responsible for running the company and must fulfill seven general duties under the Companies Act 2006, which includes keeping company records and filing accounts and company tax returns. Colleagues can be hired to help with these tasks, like a company secretary, but the director will be where the buck ultimately stops.

3. Decide on shareholders

To set up a limited company you need to have at least one shareholder, which can simply be you as the director. If you have more shareholders, your registration will need to state how many there are and what their shares are worth. You'll also need to provide information on what share of dividends each shareholder gets, whether they can cash in their shares for money, if they can vote on company matters and, if so, how many votes they get. These are called prescribed particulars.

4. Identify people with significant control (PSC)

These are people who might own or otherwise control your company, including yourself. You have to tell Companies House who these people are. A PSC is someone with (at least) 25% of shares in a company and 25% share in voting rights, as well as the right to appoint or remove a large proportion of the company's board of directors. Full PSC guidance can be found here.

5. Prepare company documents

When registering you'll need two different documents: the 'memorandum of association' and 'articles of association'. The memorandum will be automatically created if you register your business online or, if you plan to register by post, you'll need to include a legal statement signed by all shareholders in agreement to form the company.

You can find a template for that on the UK government's website. Articles of association are the rules you and any shareholders, directors, and company secretaries agree on for running the company. You can create your own or use the pre-created standard ' model articles '.

6. Organise your company and its accounts

Good record keeping from the start makes managing your company easier. Make sure you have set up systems to keep records of both the company itself as well as financial and accounting records. For details of what you need to keep track of there's a full list on the UK government's website. You can hire an accountant or bookkeeper to help with your record-keeping.

7. Register the company

Finally, you're ready to register the company! To do this you'll need your company's official address (it must be a physical building within the country you're registering in) and to choose a SIC (Standard industrial classification) code that describes what your business does.

Identity verification requirements

To increase transparency and combat economic crime, Companies House now requires identity verification for all new and existing company directors and PSCs, part of a broader government strategy that includes the Economic Crime Act 2022.

When you register your company, you'll need to verify your identity through a secure digital process or by providing documents. This helps confirm that the people running the company are who they say they are, making the UK a safer place to do business.

How long does it take to set up as a limited company?

Limited company registration time depends on your chosen method:

• Online registration: 24 hours or less (fastest option)
• Postal registration: 8-10 days using form IN01

Online registration is both quicker and cheaper than postal applications.

Want help with your registration? No problem. You can find experienced accountants and bookkeepers in the Xero advisor directory.

What are the legal responsibilities of a limited company?

Limited company directors have these key legal responsibilities:

• Record keeping: Maintain accurate accounting records and company documents
• Annual filing: Submit confirmation statements and annual accounts to Companies House, with accounts for a private company due within nine months after the end of the accounting period
• Tax compliance: File corporation tax returns and pay tax on time
• Company updates: Notify Companies House of changes to directors, address, or people with significant control (PSCs)
• Statutory requirements: Hold annual general meetings and maintain statutory registers

Xero's accounting software can help you manage your accounts and prepare year-end reporting. Find the full list of director responsibilities on the UK government's website.

What to do immediately after registration

After you register your company, take these steps to get your business running.

• Set up a business bank account: Your limited company is a separate legal entity, so it needs its own bank account to keep finances separate from your personal ones.
• Register for : You must register for Corporation Tax. You need to tell HMRC within three months of starting your business.
• Set up your accounting records: Start keeping accurate records of all your income and expenses from day one. Using accounting software can make this much easier.
• Consider other tax registrations: You may also need to register for VAT or set up a payroll scheme if you plan to hire employees.

Getting your limited company up and running

Setting up a limited company is an exciting step towards building your business. With the right preparation and tools, you can manage your responsibilities with confidence. When you keep your finances organised from the start, you can focus on running your business. Ready to simplify your bookkeeping? Try Xero for free.

FAQs on setting up a limited company

Here are answers to some common questions about setting up a limited company.

Can I set up a limited company by myself?

Yes, you can. You only need one person to act as both the director and shareholder to register a private limited company in the UK.

What happens if I make a mistake during registration?

Check your application carefully before you submit it. If Companies House finds a mistake, you will need to resubmit your application or file extra forms to correct it.

Do I need an accountant to set up a limited company?

You do not need an accountant to set up a limited company, but their advice can help. An accountant can help you choose the right business structure and understand your financial and tax responsibilities.

Can I change my company name after registration?

You can change your company name after registration. You need to pass a special resolution and tell Companies House by filing the right form. There is a fee.