How to Setup a LTD Company For Free

So you’re ready to start your new business and want to setup a private LTD company? This guide will talk you through step by step, from start to finish exactly how to complete the process in a little over 15 minutes and be registered in 24 hours, leaving you to focus on generating your first sale.

In this Article You’ll Discover

Why Setup a LTD Company?

You’ve probably already done the research and are happy with your decision to make the big leap forward setting up your LTD company. However if you are unsure, take a look at this post: Sole trader or limited company? It discusses the pros and cons of both structures. But for speed, here is a quick summary

Choose a Company Name

Your first step to setting up a LTD company is to choose a company name. Your company name must be unique and not similar to any other company that is already registered. This is simple to perform and a quick check of your proposed name on the Companies House website will tell you if your name is already in use.

It’s also worth searching the intellectual property office website to see if there are any registered trademarks associated with your company name. The last thing you want is a legal fight with another company once you’re established.

Your name must not be offensive, or contain swear words, so bear also this in mind. Remember your LTD company name is publicly viewable at Companies House, so you want it to be as professional as possible. 

There are a few other words that you can’t use without permission or obtaining the correct accreditations. For example, your company name mustn’t contain Chartered, Bank, Royal, British, English, Scottish, Commission or words that imply professional qualifications that you don’t hold. Here is a full list of documents relating to naming your company and what you can and can’t do. 

Your registered company name must end in Limited or LTD. You can use different business name for trading as long as it’s not trademarked.  For example, Sprightly cleaning LTD trading as Superstar cleaners is perfectly acceptable. When you invoice clients, you’ll ask clients to pay Sprightly cleaning LTD and not your trading name. 

Choose the Shareholders

The next thing you’ll need to decide is who the shareholders are. Will it be Just You? Are you splitting the shares between you and a friend or spouse? Do you have investors that are providing some capital to get you up and running? 

You can change this later, but it’s best to get it right from the outset to prevent further complications and admin later down the line. 

Are all shares going to be the same class of share? There are lots of different ways that you can allocate shares, with different voting and dividend rights and it could be worthwhile talking this over with a reputable accountancy firm if you are unsure. Setting your LTD company up with a structure that suits your needs can save you a fortune in taxes and administrative costs in subsequent years. 

Bark and unbiased are excellent services that can help to find an accountant near to you that specialise in company formations and can save you a lot of money in the long run. By using a specialist accountant, you may not even need the rest of this guide!

How Many Shares Should You Allocate?

This will depend on how many shareholders you have, but if it’s just you there is nothing to stop you allocating yourself 1 share. You may want to sell some of your shares as you progress on your business journey and having more shares will make it easier to sell a portion of your business in the future. 

Issuing 100 or even 1000 shares could be an appropriate amount as this makes each share easily divisible. If you have 100 shares, then 10 shares would be 10% of the business. 

You will also need to give these shares a value. The total of all the shares is known as the share capital and this is what shareholders will be liable for if the company runs into financial difficulty. 

Let’s say you have 100 shares issued at £1 each and you own 100 shares, then your liability to the business is £100. It therefore makes sense if you are a small business startup to issue your shares at £1 or £0.01

Register for Self Assessment

One big bonus of becoming a shareholder in a LTD company is that you will be able to pay yourself dividends. Dividends may be taxed at a lower rate than income tax as a sole trader, so it can result in tax savings. If you are planning to receive dividends from your company profits, you will also need to register for self assessment with HMRC.

Choose Your Company Officers

Directors

Every Limited Company must have at least one director. Directors are responsible for the business at all times. As a director of your company you are responsible for ensuring company accounts, company returns and notices of change are submitted to Companies House. 

Shareholders in the business are usually directors too (although they don’t have to be). You may have a shareholder that doesn’t wish to take an active role in the company (known as a silent partner/investor) and that’s fine, they don’t need to be a director. 

Being a company director comes with great responsibilities. See the full guide from Companies House about exactly what is expected when you become a director. 

Brief Summary of Directorship Responsibilities

• You must follow the company’s constitution and articles of association
• Promote the success of the company always acting in the best interests of its success
• Operate using independent judgement, not allowing other people to exercise power over your decision making
• Exercise reasonable care, skill and diligence. Perform to the best of your ability and skills
• Avoid conflicts of interest. Avoid situations where your loyalties maybe divided
• You must not accept third party benefits because you are a director, as this could create a conflict of interest
• Interests in a transaction. You must notify the company if you might personally benefit from a transaction that the company makes. 

To be a company director you must be:

• Aged 16 or over
• Are not currently a disqualified director. 
• Have not been declared bankrupt. Note that you can become a director once you have been discharged from bankruptcy
• You are the auditor of the company

Company Secretary

The company secretary is responsible for maintaining all of the statutory registers and taking board minutes. They are usually professionally qualified (barristers, lawyers, accountants etc), but they don’t have to be. 

What are statutory registers?

You don’t need to appoint a company secretary and if you are the only shareholder and director in the company, you can fulfil these roles. However it may be an appointment that you want to consider as your business grows. 

Create a Memorandum of  Association

You will need to create a memorandum of association when setting up a LTD company. This will include the names of the shareholders and their signature. It is a legally binding document that states the shareholders wish to setup the company. 

You can use the model version supplied by Companies House when setting this up yourself and lists amount of share capital and how it’s divided between various owners.

Create Articles of Association

Your Articles of Association are the rules with which the directors, shareholders and the company secretary agree on how the company will operate. 

It covers:

• interpretation and limitation of liability
• directors’ powers and responsibilities
• shares and distributions
• decision making by shareholders
• administrative arrangements

You can choose to use a Model version from Companies House for free. You simply download it and submit it during your application process.

Find Your SIC Code

To register your LTD company you will need to supply and SIC code. This essentially tells Companies House what the nature of your business is. This will help determine what VAT you should charge and how you will be taxed on your business activities. It’s also used for various stats that the government uses to analyse business sectors. 

To Find your SIC code – Simply scroll through the list or perform some searches. If you are setting up an internet business your code would be:

47910 – Retail sale via mail order houses or via Internet

​​Register Your Business

If you’ve made it this far, give yourself a big pat on the back. You now have all the information required to register your LTD company. The good news is that you can do this yourself at companies house for £12. 

Alternatively, you can register a company for free when you open a Tide bank account. It’s worth noting that if you choose to register your LTD company using TIDE, you can only register with one shareholder, but you can change this later. 

Don’t choose to register your LTD company with Tide just because they offer free company registration. They are a superb option, but may not be the best for you. Make sure you read our best business bank accounts for LTD companies before jumping in. 

To complete the process, you will need the following information for your shareholders

• town of birth
• mother’s maiden name
• father’s first name
• telephone number
• national insurance number
• passport number

You’ll also need to be able to pay with credit/debit card or PayPal. If you are unable to pay using PayPal or via credit card, then you can submit an application via post and make payment via cheque. This will cost you £40. 

Choose Your LTD Company’s Registered Address

Your newly formed LTD company will require a UK registered address. You can use your home address for free if you want, but it’s worth noting that this will be on public record, so many people choose to use a service that offers a separate registered address for privacy purposes. 

Some people feel that it appears more professional to have a registered address in a large business district, for example Canary Warf, Manchester Business Park etc, so this is something that you may want to consider.

The best company formation agents will usually include a registered office address in their medium tier packages. 

If you are completing the LTD company formation yourself  without using a company formation agent and still want a separate registered address, you can take a look at the best services offering registered addresses.

One final thing to note, if you do opt for a service offering you a registered address, make sure it’s in the same country within the UK as your registered office.

Selecting a Trading Address

Your trading address is where your bank, suppliers and customers send correspondence to. You may be pleased to know that  your registered address can be different from your trading address so you could still use your home address even if you’ve chosen a separate registered address .

Create a Government Gateway ID

You will need to create a government gateway ID. If you are already a sole trader and have registered as such, you will still need to create a new one. Govt gateway ID will be used to file confirmation statement at year end.

You’ve setup Your LTD company

Once you’ve completed this process, within 24 hours you will have registered your LTD company. It only cost you £12, or free if you opted to register your LTD company whilst creating a TIDE Bank account. 

If you are completing this process on your own, there are some further steps that you will need to take. Your LTD company has a number of responsibilities to fulfil. Other things you will want to undertake to ensure everything runs as smoothly as possible

Find an Accountant

One of your first jobs should be to find yourself a good accountant. It’s likely that having a good accountant will save you far more than they cost in the long run. A good accountant will help with tax planning, filing of documents, Corporation accounts, setup and payment of VAT, creating and maintaining payroll and avoiding fines. 

You can take a look at our article that takes you through how to find a good accountant, but a good place to start would be Bark and Unbiased. Both will provide you with introductions with  local accountants, wirth no obligation to purchase their services. 

Generate a Share Certificate. 

You’ll need to generate a share certificate within 2 months of forming your LTD company for every shareholder in the business. It must contain the following:

• name and address of the shareholder
• number of shares held by the shareholder
• type of shares (ordinary)
• share price
• date of issue
• a unique share certificate number
• details of the company issuing the shares

If you only have ordinary shares, this share certificate template may be adequate for your needs.

Create Company Registers

A LTD company is legally obligated to maintain the following company registers:

• Register of Members (MGT-1) ( the shareholder register)
  • Example Shareholder register
• Register of people with significant control (PSC)
  • Example PSC register
• Information as to state of central register
• Register of directors
• Register of directors’ usual residential addresses
• Register of secretaries
  • Example of Register of Directors and Secretaries with addresses 

Setup a Bank Account

Your newly formed LTD company will require a bank account of its own. Thankfully this process is much easier today than in years gone by. We have a full guide on how to choose the best business bank account, but our top picks are

• Starling Bank – One of the easiest and cheapest LTD Company bank accounts
• Tide – Easy to setup and will pay your LTD company registration fee

Another option could be to speak with the bank that you use for your personal finances. Although traditional banks are often more expensive when it comes to business banking than the likes of Starling bank, they may be quicker to accept you if you have a personal bank account with them and you can always switch at a later date. 

To open a business bank account for your LTD company you will need a the following

• A registered LTD company
• Proof of the registered company address
• Proof of address, such as a recent utility bill or council tax statement
• Your Certificate of Incorporation 
• Tax and VAT registration details
• At least one director as a signatory 

Register for Corporation Tax

If you plan to start trading right away, you’ll need to register for Corporation tax within 3 months of creating your limited company. Failure to do so, could result in your company receiving a fine.

Registering for Corporation Tax is relatively straight forward. You will need your Government Gateway ID. 

You’ll also need your company’s 10-digit Unique Taxpayer Reference (UTR). This should be posted to your company address by HM Revenue and Customs (HMRC) within 14 days of the company being registered with Companies House (incorporated). 

If you haven’t received this within 14 days you can request it here.

Sign Up for Some Accounting Software

If you’ve already found an accountant (which we highly recommend that you do), they will be able to help you with choosing accountancy software. However it’s highly likely that they will recommend one of the 2 largest accounting software providers in Xero or Quickbooks.

You don’t need accountancy software as a LTD company, but you will probably need an accountant to file your end of year accounts and using accounting software like Xero will save your accountants a substantial amount of time, which in turn will lower your accountancy bill if you are paying by the hour. 

Accounting software will help you in many other ways. Some of which include

• Raising invoices and quotes
• Submitting VAT returns
• Manage income and expenses
• Quick snapshots for your profit and loss
• See quick cash summary positions
• Manage your PAYE/ Payroll

Start Trading

If you’ve completed all the above steps, you should be in a place to start trading as a LTD company. You are now free to start getting your business out there out there.

Now that you have setup a LTD company you will need to file your annual accounts and company statements, but your accountant can help you keep on top of that. Well done on completing a complicated process and the best of luck in your endeavour.