Starting a Business (Company Formation)
How to incorporate a limited company in England & Wales, including legal requirements and ongoing obligations.
Overview
Incorporating a limited company creates a separate legal entity (Salomon v Salomon [1897]) that can own property, enter contracts, and sue and be sued in its own name. The shareholders' liability is limited to the amount unpaid on their shares. Companies are incorporated at Companies House and governed by the Companies Act 2006. Most small businesses incorporate as private companies limited by shares (Ltd).
Step-by-Step Process
Choose a Company Name and Structure
Choose a unique company name — check availability at Companies House. Decide on the company structure: private limited by shares (Ltd) is the most common for small businesses. The name must end in 'Limited' or 'Ltd' and must not be the same as or too similar to an existing registered name.
- Check the Companies House name availability checker
- Certain words ('Royal', 'Bank', 'Insurance') require permission to use
- Consider registering a matching domain name and trademark
Prepare Formation Documents
Prepare the memorandum of association (a simple statement that the subscribers wish to form a company) and articles of association (the company's constitution governing internal management). Most small companies adopt the model articles prescribed by the Companies Act 2006.
- Model articles are suitable for most small companies — bespoke articles are needed for complex arrangements
- You need at least one director (who must be a natural person) and one shareholder
- You do not need a company secretary for a private company, but you can appoint one
Register with Companies House
Submit the incorporation application to Companies House. This can be done online (most common, costs £12 and takes 24 hours) or by post (costs £40 and takes 8–10 days). You need to provide: the company name, registered office address, details of directors and secretary (if any), details of shareholders and share capital, a statement of compliance, and the memorandum and articles.
- Online incorporation is cheapest and fastest
- The registered office must be a physical address in England & Wales (or Scotland/Northern Ireland as appropriate)
- Same-day incorporation is available for £30 online or £100 by post
Set Up Tax and Regulatory Registrations
Register for Corporation Tax with HMRC within 3 months of starting to trade. Register for VAT if turnover exceeds the VAT threshold (currently £90,000) or voluntarily. Register for PAYE if you employ staff. Set up a business bank account.
- HMRC will send a Corporation Tax registration letter to the registered office
- Consider registering for VAT voluntarily even below the threshold if you sell to VAT-registered businesses
- You must file annual accounts and a confirmation statement with Companies House
Ongoing Legal Obligations
As a director, you have legal duties under the Companies Act 2006 (ss.170–177): duty to promote the success of the company, exercise independent judgment, exercise reasonable care and skill, avoid conflicts of interest, not accept benefits from third parties, and declare interests in transactions. The company must file annual accounts, a confirmation statement, and notify Companies House of any changes.
- Annual accounts must be filed within 9 months of the financial year end (private company)
- Confirmation statement must be filed at least once every 12 months
- Late filing of accounts results in automatic penalties (£150–£1,500)
Costs
Important Warnings
Directors can be personally liable for wrongful trading (continuing to trade when the company has no reasonable prospect of avoiding insolvent liquidation — Insolvency Act 1986, s.214).
Failure to file accounts or confirmation statements can result in the company being struck off the register and the directors being disqualified.