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Setting up a Private Company Limited by Shares


Ashored | Setting up a Private Company Limited by Shares

Introduction The formation and operation of a private company limited by shares is highly regulated under the Companies Act 2006. Companies must be registered with Companies House and HM Revenue & Customs (HMRC) and they are subject to a variety of rules requiring them to report annually to both Companies House and HMRC.

This factsheet explains what is meant by a private company limited by shares and how to register a company or buy an 'off-the-shelf' company that has already been registered. It also explains the restrictions to be aware of when choosing a company name and the process of registering with HMRC for corporation tax. It briefly covers statutory reporting requirements.


What is a private company limited by shares? A private company limited by shares (usually known as a 'limited company'), has a separate legal identity to that of its owners, unlike a business run by a sole trader or a partnership. A company can own property and other assets in its own right, as well as sue and be sued.

The owners of a company limited by shares are called 'members' or 'shareholders' and benefit from limited liability, so that if the company is wound up the shareholders will lose the value of their investment in the shares, but their personal assets will be protected. Directors, who may or may not be shareholders, are appointed to manage the company.

Shares in private limited companies cannot be publicly traded. They are usually held by directors, employees, other companies, family members or other investors. Any profit made is owned by the company and, after payment of corporation tax (and depending on its precise legal structure), the company can either share out the profits or retain them for re-investment in the business.


Restrictions on company names It is not possible to register a company with the same name as another company (or one that is too similar).

Certain words can only be used with permission from a relevant authority, and names that may cause offence are not permitted.


How to register a company with Companies House A limited company must be registered with Companies House before it can start to trade. This process is also known as 'incorporation'.

The information and documents that must be supplied when registering a company include the following:

  • The company's name.

  • Details of the company's directors.

  • Details of 'people with significant control' over the company.

  • A registered office address where official communications can be sent, that will be publicly available on the companies register. This must be a physical address in the same country in which the company is being registered (for example a company registered in Scotland must have its registered address in Scotland).

  • A memorandum of association, which demonstrates the agreement of all the shareholders (known as the initial 'subscribers') to the formation of the company.

  • Articles of association (which set out the rules about how the company will operate and the powers of the directors), unless the company will be using 'model' articles, which apply to the company by default if no other articles are supplied when registering.

  • A statement of capital that includes the names and addresses of all the shareholders and the number and type of shares the company has issued (known as its share capital).

  • The correct SIC code (standard industrial classification code), which informs Companies House of the nature of the company's business.

The fee for online registration is £12 and online applications are usually registered within 24 hours. A company can also be registered by post, which costs £40 and takes eight to ten days. Buying an off-the-shelf company Company formation agents and solicitors can provide 'off-the-shelf' companies, which are companies that have been pre-registered with Companies House but have never traded.

Company formation agents prepare all the documentation and register the company with its own name and with the agent's staff as directors and secretaries. When the company is bought off-the-shelf, the agent simply arranges for completion of the forms that change the company's details to match the new owner's business. The agent then notifies Companies House, which formally records these changes.


Registering for corporation tax Companies that register with Companies House using the online service can register with HMRC for corporation tax at the same time.

However, companies that register with Companies House by post, or by using a formation agent or specialist software, must register for corporation tax separately, using a 10-digit unique taxpayer reference that HMRC posts to the address of the new company within 14 days of registration with Companies House.

If a new company has not yet started trading, it can be registered with HMRC as dormant. However, HMRC must be informed once the company becomes active, and it must be set up for corporation tax within three months of the start of the accounting period to avoid penalties.


Statutory reporting requirements Company directors are legally responsible for ensuring that the company meets all its legal reporting obligations. These responsibilities include:

  • Preparing financial statements.

  • Maintaining statutory books and registers, such as the register of people with significant control over the company (the PSC Register), and informing Companies House of any changes.

  • Filing an annual confirmation statement.

  • Keeping accounting records.

Directors are responsible for the submission of statutory documents to Companies House and must provide notice of changes in the company's structure and board of directors. In particular, they are held personally responsible for the submission of accounts, with late filing resulting in a fine.


Contact Ashored for more information and support on setting up a Limited Company and the ongoing responsibilities.

Contact me for more information on the services and support that we can provide

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