How do you go about setting up a company?

The question
many ask is why set up a private limited company?  This question is asked mainly because setting
up a company is likely to involve more administration and higher costs then if
you remain as a sole trader.  The answer
to this question concerns your personal financial liability.  If you are sole trader and your business
fails, you are personally responsible for all of the business’ debts.  This means you are running the risk of
personal bankruptcy if it is a large debt and you cannot afford to pay it.  By setting up a limited company you are
protecting yourself against this.


Because a
limited company is a separate legal entity it is therefore responsible for its
own actions.  The finances of a private
limited company are completely separate from those of the owner(s).  To a certain extent being a limited company
might make you seem more credible to potential investors, partners and


So how do you go
about setting up
a company
?  Setting up a limited
company will require you to register at Companies House.  By paying a small fee you can arrange for an
accountant, solicitor or agent to do this on your behalf.  All you need to do is provide some basic
information and a few signatures.  There
are ready made limited company names that can be purchased if you wish to do
so.  The alternative is to form a brand
new limited company.  If you wish to do
this you need to send a memorandum of association, articles of association and
a completed IN01 form to Companies House. 
A memorandum of association gives details of the company’s name, nature
of business and registered office.  This
document must be signed by the director(s) and in front of a witness.  The registered office of the company is the
address where all correspondence from Companies House will be sent to.  The articles of association will set out the
rules for running the business and also the regulations.  Companies House will not supply memorandum or
articles and these can be purchased from a company-formation agent or a legal


A private
limited company must have at least one director and they can also be a
shareholder.  If a person has been
disqualified from acting as a limited company directorFree Web Content, are an undischarged
bankrupt or are less than 16 years old they cannot assume this role.  Directors of limited companies are
responsible for notifying Companies House of any changes to the structure and
management of the company.  Company directors
are also employees of the company and must pay income tax and Class 1 National
Insurance contributions.

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