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Before forming a UK limited company, there are a few things you should understand.

It used to be that forming a UK limited company was a complicated and expensive procedure carried out through Companies House or with an account, but the whole process can now be done quickly, easily and affordably through an online company formation agent. While company registration itself is simple, running a limited company can prove slightly more complicated than operating as a sole trader. So there is a few things that you ought to know before diving into company formation:

What type of company?

There are different types of limited company which can be formed in the UK, so it is important to understand the options and get the right one for your business. The structures to look at are companies Limited by Shares, Limited by Guarantee and Limited Liability Partnerships.

Companies Limited by Shares is the most popular type of company formed in the UK, and is appropriate for most companies looking to make a profit. Limited Liability Partnerships (often used by the likes of solicitors, doctors and architects) retain the flexibility of a traditional partnership structure while also offering limited financial liability. Companies Limited by Guarantee are used for non-profit organisations and charities.

Naming rules

As a sole trader you can represent your business with just about any name you choose, but as limited companies are officially registered this is a little bit different. This may seem inconvenient but it also means that no other companies can register the same name. There are two main rules which need to be followed:

Address details

There is some address terminology commonly used when it comes to forming a limited company, and this can be initially quite confusing for a lot of people – so here’s what they mean.

The Registered Office is the official address of the company which appears on public record and will be used to receive statutory mail to the company from HMRC and Companies House. The Director’s Service Address is, as the name suggests, meant exclusively for the company director. This is also used to receive mail from HMRC and Companies House but addressed to the individual director rather than to the company itself. This address will also be shown on public record. The third commonly used term is a Business address. This is the address you will provide to customers, suppliers, merchants etc. and appears on your website and any other promotional material. This address is not shown on public record and you can choose any address you wish for this purpose.

What else do you need?

When incorporating through a company formation agent (which is the quickest and easiest way to set up your company) there will general be a number of optional extras which you can take on when first setting up your business.
The most popular extras tend to be a free business bank account, VAT & PAYE registration, nominee services (if you don’t want your directors’ or shareholders’ names to appear on the public record) and an introduction to a reputable accountant – this can be invaluable for new small businesses to make sure all of their numbers are being crunched correctly.

Running a limited company

Running a limited company involves far more statutory filing requirements than operating as a sole trader, as you will be required to file both annual returns and annual accounts. An Annual Return is a yearly update which is sent to Companies House detailing any important changes to your limited company (directors/shareholder details, company addresses etc.). The annual accounts are a financial overview of your company’s business trading each year and must be submitted to HMRC. While these additional filing requirements may make a limited company seem unappealing it is worth noting that it does also allow for a more tax efficient business structure once your business is earning a reasonable amount of profit.