UK Company formation- Process of formation of company & How we can help

Most people start as a sole trader (essentially self-employed) when they first set up a business in the UK. However, after trading for a while, it may make more sense to set up a private limited company.

The process to form a limited company is quite straightforward, but it is essential for a person to understand how their legal position, financial arrangements, and other responsibilities will change after forming a limited company.

Process of formation of a company

1. Choose a company structure

There are two types of limited company structures to choose from.

• Limited by shares; and 

• Limited by guarantee 

The most common structure people use is a limited by shares company. It is specifically designed for a person who wants to run a commercial/profit-making business, either alone or with others.

A limited company (by shares or guarantee) is a legally separate entity from the persons who own it, and one or more company directors are responsible to run the business. There are several responsibilities and things to consider when running a limited company.

The business structure one chooses can affect the way they pay their tax and their legal responsibilities.

2. Choose directors and a company secretary

You must appoint at least one director in the company, but you are not required to appoint a CS (Company Secretary). Members (the owners of the company) appoint one or more directors to legally run the business on their behalf. The same person can be a director and member, which means you can set up a company on your own. You can also appoint two or more directors and members if you want to own and run the business with other people.

A director must be aged 16 or over and they must not be disqualified from being a director. They are not required to live in the UK but companies must have a UK registered office address.

In the UK, a private limited company is not obligated to have a company secretary. Nevertheless, a company may decide to appoint one to handle certain duties on behalf of the directors.

A company secretary can also serve as a director, but they are not allowed to be:

• the company’s auditor

• an individual who has been declared bankrupt and has not yet been officially released (an undischarged bankrupt), unless they have obtained approval from the court

• Individuals who are bankrupt face legal restrictions, which generally end once they are discharged bankrupt (released from their debts).

It is important to remember that the directors have the full legal responsibility for the company, even when a company secretary is in place.

3. Deciding who the shareholders or your guarantors are and identifying people with significant control (PSC) over your company

Deciding on shareholders

A company limited by shares must have at least one shareholder, who may also serve as a director. If a single person holds all the shares, they will own the 100% of the company. There is no maximum or fixed number of shareholders a company can have.

Shareholders have certain rights, including:

• Controlling the company and making key decisions

• Receiving a share of the company’s profits through dividends

• Casting their votes to agree to changes to the company

When registering your company, you will need to provide details about your shares and the shareholders.

Deciding on guarantors

If you are setting up a company in the UK that is limited by guarantee, it must have at least one guarantor and a ‘guaranteed amount’ instead of shares and shareholders.

A guarantor is a company member. They control the company and make important decisions. They do not usually take profit from the company. The money is kept within the company or used for other purposes instead. A guarantor can also be a director of the company.

When registering your company, you will need to provide details about your guarantors and their guaranteed amount.  

Guaranteed amount is an agreed amount of money promised by guarantors to the company if it cannot pay its debts.

Identifying PSC over your company

A shareholder owning more than 25% of shares or voting rights in a company is classed as a PSC (Person with significant control). They can appoint or remove a majority of directors and influence or control your company or trust.

You need to identify such people in your company. You will confirm these to the Companies House when registering your company.

If your company cannot identify a PSC, or does not have one, you need to inform Companies House.

4. Choose a name for the company

Those setting up a private limited company must choose a name for their business. Your name cannot be the same as the name of another registered company. Those with a name too similar to another company’s name or trademark may have to change it if someone makes a complaint.

The company’s name must usually end in ‘Ltd.’ Or ‘Limited’. 

Your company name cannot 

• be offensive.

• contain a ‘sensitive’ word or expression, or suggest a connection with local authorities or government, unless you get permission. For example, if you want to use ‘Accredited’ in the name of your company, you need permission from the DBT (Department for Business and Trade).

Trading names

You can trade using a different name (known as ‘business name’) from your registered name.

Business names must not include ‘Ltd.’, ‘limited’, ‘LLP (Limited Liability Partnership)’, ‘PLC or public limited company’, and must not contain a ‘sensitive’ word or expression unless you get permission

Those with their business name being too similar to the trademark of another company may have to change it if someone makes a complaint.

When your company does not have to use ‘limited’ in its name

You do not have to use ‘limited’ in your company name if your company is a registered charity or it is limited by guarantee and your AOA (Articles of Association) says that your company:

• regulates/promotes art, science, commerce, education, charity, religion, or any profession

• cannot pay the shareholders, for example, through dividends

• requires each shareholder to contribute to its assets if the company is liquidated/wound up while they are a member, or within 12 months after they cease to be a shareholder.

5. Prepare documents agreeing on how your company will be run

You need to prepare these documents, which include:

• ‘Memorandum of association' – this is a legal statement signed by all initial guarantors or shareholders agreeing to form the company

• 'Articles of association' – these are written rules about running the company agreed by the guarantors or shareholders, directors, and the company secretary

• 'Statement of capital' – a legal document showing the number of shares of each type the company has and their total value

• 'Statement of guarantee' – the statement should have the names and addresses of all guarantors, the amount agreed by each guarantor to contribute if the company cannot meet its debts. It must also contain information on the purpose and scope of the guarantee. The statement must be signed by each guarantor.

6. Check what records you will be required to keep

You must keep records:

About the company

You must keep details of:

• the company's shareholders and the results of any shareholder votes and resolutions

• commitments for the company to repay loans at a specific future date (‘debentures’) and to whom they must be paid back to

• promises made by the company for payments if something goes wrong and it is the company’s fault (‘indemnities’)

• transactions when an individual purchases shares in the company

• loans or mortgages secured against the assets of the company

Accounting records

You must keep the following accounting records:

• all the money the company spent and received

• details of company-owned assets 

• debts the company either owes or is owed

• stock owned by the company at the close of the financial year

• the stocktakings that you used to arrive at the stock figure

• all goods sold and bought

• those you bought goods from and sold to (unless running a retail business)

You must also maintain any other financial records (such as receipts, petty cash books, invoices, contracts, and sales books), any additional information, and calculations that may be needed for preparing and filing your annual accounts and Company Tax Return with the HMRC.

Those not keeping accounting records can be fined £3,000 by HMRC (HM Revenue & Customs) or disqualified as a company director. 

These records (about the company and accounting records) must be kept for 6 years after the end of the last company financial year they relate to, or for longer (in certain circumstances).

7. Register your company with Companies House

Before you register the company, you may be required to verify your identity using GOV.UK. You will get a Companies House unique personal code to show that you have verified your identity.

In case there is more than one director in your company, you must have a personal code for each director.

Those who have not verified their identity with Companies House before can do so online.

You only need to verify your identity once.

Those already with a unique personal code can find it in their Companies House account.

At the time of setting up a limited company, you must provide a registered office address and an email address, and select a Standard Industrial Classification code that describes the type of business your company conducts.

Register your limited company using the online service at gov.uk. In most cases, your company will automatically be registered for Corporation Tax at the same time.

You may need the Companies House security code. You would have received this code after verifying your identity to register your company.

As part of the process, you will also need to declare your PSCs(People with Significant Control).

Once your registration is complete, you will receive a Certificate of Incorporation, an official document confirming that your company legally exists. This certificate will show your company number (a unique identifier) and the date of formation.

You will require 3 or more pieces of your personal information and your shareholders’ or guarantors’ personal information, for example:

• town of birth

• mother’s maiden name

• father’s first name

• telephone number

• NI (national insurance) number

• passport number

You must pay a fee by credit or debit card. Once payment is made, your company is usually registered within 24 hours.

You can also register for the PAYE (Pay As You Earn) system online to notify HMRC that you will be employing staff, including yourself if you are the sole director.

If you do not wish to include the word “Limited” in your company name, you must complete the registration by post.

Other ways to register

A company can also be registered by post, through an agent, or using approved third-party software.

After registering for Corporation Tax with HMRC, you will receive your 10-digit Unique Taxpayer Reference (UTR). Once you receive this, you must add the Corporation Tax service to your business tax account.

How can Visa and Migration help?

At Visa and Migration, we provide various corporate services to help entrepreneurs, investors, and overseas founders form a company in the UK. Based on your goals, visa plans, and tax considerations, we help you choose the right business structure. 

We help you in 

• Choosing a company structure (Limited by shares or Limited by guarantee)

• Selecting a company name 

• Designating a registered office address 

• Confirming members (shareholder or guarantor), appoint officers (director), and identify PSCs

• Preparing all required incorporation documents, including Memorandum and Articles of Association 

• Specifying share structure

• Completing and submitting the company registration application online to Companies House on your behalf

We also support you in setting up a UK business bank account, obtaining the Certificate of Incorporation once the company is approved, registering your company for Corporation Tax with HMRC, advising and assisting you with VAT registration if applicable, and understanding your ongoing compliance and tax obligations.

For clients seeking to live or work in the UK, we provide visa-focused guidance, ensuring your business setup aligns with relevant immigration pathways. Whether you are a startup founder, international business owner, or investor, we simplify the process, reduce delays, and help you avoid costly mistakes.

For expert advice and queries, you can call us at +44 (0)20 3411 1261 or write at info@visaandmigration.com