Setting Up a UK Limited Company: The Complete Legal Guide

Reviewed by the Legal Foundations editorial team. Last updated: March 2026.

Incorporating a limited company in the UK takes about 15 minutes online and costs £50. The technical process of registering with Companies House is not what this guide is about.

What most incorporation guides skip is everything that happens after registration — the documents you actually need, the governance decisions that matter, the corporate housekeeping that keeps your company clean for investors and auditors, and the legal structures that protect you and your co-founders from the most common disputes.

This guide covers the legal substance of setting up a UK limited company properly, from choosing the right structure to having the documents in place before your first investor conversation.

Limited Company vs Sole Trader vs LLP — Choosing the Right Structure

Before incorporating, you need to choose the right legal structure. Most businesses end up as limited companies, but it’s worth understanding why.

Sole trader

A sole trader is the simplest structure. There’s no registration with Companies House, no filing obligations beyond self-assessment, and no distinction between you and your business. The profits are yours and so are the liabilities.

The problem: There is no legal separation between you and your business. If your business is sued, your personal assets — your home, your savings — are at risk. For most business activities, this is unacceptable risk.

When it makes sense: Very early-stage freelancing or consulting where the risk profile is low, you’re the only person involved, and you have no plans to raise investment.

Partnership

Two or more people can trade as a simple partnership — again, with no registration beyond HMRC notification. Partners share profits and debts. Each partner is jointly and severally liable for the partnership’s debts, including those incurred by their partner.

The problem: Full personal liability for all partners, including for acts of the other partners. This is why simple partnerships are rarely advisable.

Setting Up a UK Limited Company

Limited Liability Partnership (LLP)

An LLP is registered at Companies House and has its own legal identity (like a limited company). Members’ liability is limited to their capital contribution. LLPs file accounts at Companies House.

LLPs are commonly used by professional practices (law firms, accountants, architects) because they combine limited liability with partnership-style profit flexibility and tax treatment. For most tech and product businesses, an LLP is not the right structure.

When it makes sense: Professional service firms with multiple equity partners where partnership tax treatment is advantageous and the professional regulatory environment makes LLP structure appropriate.

Private limited company (Ltd)

A private limited company is by far the most common structure for UK startups and growing SMEs. Its key advantages:

  • Limited liability: Shareholders’ liability is limited to the value of their shares. Personal assets are protected.
  • Separate legal entity: The company can enter contracts, own property, and be sued in its own name.
  • Investment-ready: Equity investment, SEIS/EIS, share option schemes, and future exits all require a limited company structure.
  • Credibility: A limited company is generally regarded as more credible than a sole trader.
  • Tax efficiency: Corporation tax rates and the ability to pay a combination of salary and dividends can be more tax-efficient than income tax on sole trader profits (though this requires proper tax advice).

Disadvantages: More regulatory requirements — annual accounts, confirmation statements, Companies House filings, HMRC obligations. More administrative overhead than a sole trader.

For anyone planning to build a scalable business, take on employees, raise investment, or sell the company in future, a private limited company is almost always the right structure.

How to Incorporate: Companies House Step by Step

What you need to incorporate

  • Company name: Must be unique and not too similar to an existing name. Cannot be misleading. Certain words require prior approval (e.g., “Royal”, “Bank”).
  • Registered address: Must be in England and Wales (for an English company), Scotland, or Northern Ireland. This will be publicly listed at Companies House. You can use a registered address service if you don’t want to list a home address.
  • At least one director: Must be a real person over 16. Companies can also be directors (in certain circumstances), but there must be at least one natural person director.
  • At least one shareholder: Can be the same person as the director. Shareholders own the company; directors manage it.
  • Memorandum and articles of association: Constitutional documents (see below).

The incorporation process

You can incorporate directly at Companies House for £50 (online) or use a formation agent (many charge similar prices and provide additional services). The online process takes around 15 minutes. HMRC is automatically notified.

On incorporation, Companies House issues:

  • Certificate of incorporation — your company’s birth certificate. Keep this permanently.
  • Company number — your unique 8-digit identifier. This appears on all official documents.

Immediately after incorporation

  • Register for Corporation Tax with HMRC (you have three months from starting to trade)
  • Set up a business bank account
  • Register for VAT if turnover will exceed the VAT registration threshold (currently £90,000 in any 12-month period)
  • Register as an employer with HMRC if you’re taking on staff or paying yourself a salary via PAYE

Articles of Association: The Default and Why You Might Want Bespoke

The articles of association are your company’s constitutional document. They govern how the company is run: how directors are appointed and removed, how shareholder votes work, how shares are transferred, what happens in a dispute.

Model Articles

When you incorporate, you can adopt the Model Articles — the standard form articles prescribed by the Companies (Model Articles) Regulations 2008. The Model Articles are fine for straightforward single-founder companies with no outside investors.

They are not sufficient for:

  • Companies with multiple shareholders where you want to restrict share transfers
  • Companies planning to raise investment
  • Companies with different share classes (e.g., A and B shares)
  • Any situation where the standard majority voting rules don’t reflect your requirements

Bespoke articles

Most investor-backed companies adopt bespoke articles of association, or at least an amended version of the Model Articles. Common amendments include:

  • Pre-emption rights on transfers: Requiring shareholders to offer shares to existing shareholders before selling to a third party
  • Drag-along rights: Allowing a majority of shareholders to compel minority shareholders to sell on the same terms
  • Tag-along rights: Allowing minority shareholders to sell on the same terms as majority shareholders
  • Different share classes: Creating A and B ordinary shares, or preference shares for investors, with different rights
  • Reserved matters: Decisions that require a special majority or specific shareholder consent
  • Deadlock provisions: Mechanisms for resolving disputes between equal shareholders

Bespoke articles should be drafted by a solicitor, particularly if you’re taking on investment. Investors will expect to see articles that reflect properly structured investor protections.

What Documents You Need from Day One

Register of Members (Shareholders)

Every limited company must maintain a register of members listing every current and past shareholder, the number and class of shares they hold, and when their shares were transferred. This is a statutory requirement under the Companies Act 2006.

Since April 2016, companies can choose to keep their register of members at Companies House (via the PSC register) rather than separately — but in practice, maintaining a clear internal register is advisable regardless.

→ Use our free register of members template

Register of Directors

Companies must maintain a register of directors (and a register of directors’ residential addresses, kept separately and not publicly available). The register must record each director’s full name, date of birth, nationality, business occupation, and residential address (kept private) and service address (public).

→ Use our free register of directors template

Share Certificates

When shares are issued, shareholders must receive share certificates confirming their ownership. Share certificates must state:

  • Company name and registration number
  • Shareholder’s name
  • Number and class of shares held
  • Amount paid up on the shares

Keep a stub book (or digital equivalent) recording every share certificate issued.

→ Use our free share certificate generator

Statutory Books

Beyond the registers above, companies must maintain:

  • Register of charges (secured lending against company assets)
  • Register of PSCs (People with Significant Control — anyone owning more than 25% of shares, having significant influence, or meeting other criteria)
  • Minutes of board meetings and shareholder meetings

Minutes of board meetings are particularly important. Record all significant decisions. Keep board minutes permanently.

Founders Agreements: Essential Before Outside Investors

If there is more than one founder, you need a founders agreement before you talk to investors. This cannot be overstated.

A founders agreement governs the relationship between co-founders. Specifically:

  • Equity split: What percentage each founder owns. This should reflect each founder’s contribution — past, present, and expected future.
  • Vesting: Founders’ shares should vest over time (typically four years, with a one-year cliff). Vesting means that if a founder leaves early, they only keep the proportion of shares that has vested. Without vesting, a co-founder who leaves after three months walks away with their full equity stake — a situation that is unfair to remaining founders and a significant red flag for investors.
  • IP assignment: All founders must formally assign any relevant intellectual property to the company. Without this, IP relevant to the business may technically remain with individual founders.
  • Decision-making: How significant decisions are made between founders (unanimous vote? majority? individual domains?)
  • Leaver provisions: What happens to a departing founder’s shares. Standard leaver provisions distinguish between “good leavers” (who leave for reasons outside their control, such as ill health) and “bad leavers” (who resign, are dismissed for cause, or breach the agreement).
  • Confidentiality: Obligations to maintain the confidentiality of company information.

Investors will ask to see your founders agreement. If you don’t have one, they will ask you to put one in place before they invest — and negotiating founder arrangements after investors are involved is awkward for everyone.

→ Use our free founders agreement template

Shareholders Agreements

The shareholders agreement governs the ongoing relationship between shareholders — including investors — and the company. It supplements (and often prevails over) the articles of association.

A shareholders agreement in the context of outside investment typically covers:

  • Reserved matters (decisions requiring investor or unanimous shareholder consent)
  • Information rights (regular management accounts, annual accounts)
  • Pre-emption rights (existing shareholders get first right of refusal on new share issues)
  • Anti-dilution provisions (in some cases)
  • Drag-along and tag-along rights
  • Founder obligations (continued employment, IP assignment)

Even without outside investors, a shareholders agreement between co-founders is valuable. It addresses things the articles don’t cover — particularly what happens when shareholders disagree.

See our fundraising guide for more detail: UK Startup Fundraising: SEIS, EIS, SAFEs and How to Structure Your Round

→ Use our free share subscription agreement template

Directors’ Duties and Responsibilities

Being a director of a limited company carries significant legal responsibilities. These are set out in the Companies Act 2006 and cannot be contracted out of.

The seven statutory duties

1. To act within your powers

Directors must act in accordance with the company’s articles of association and only exercise their powers for the purposes for which they were conferred.

2. To promote the success of the company

Directors must act in good faith in the way they consider most likely to promote the success of the company for the benefit of its members as a whole — taking into account long-term consequences, employee interests, supplier and customer relationships, community and environmental impact, and the company’s reputation.

3. To exercise independent judgement

Directors must make decisions independently and not simply rubber-stamp decisions made by others.

4. To exercise reasonable care, skill and diligence

The standard is that of a reasonably diligent person with the general knowledge, skill, and experience that may reasonably be expected of a person in that position — plus any specific knowledge, skill, or experience the director actually has.

5. To avoid conflicts of interest

Directors must avoid situations where they have (or may have) an interest that conflicts with the interests of the company. This includes personal business interests, investment opportunities that arise through the director’s role, and relationships with counterparties.

6. Not to accept benefits from third parties

Directors cannot accept benefits from third parties that arise by reason of their directorship.

7. To declare interests in transactions

If a director has a direct or indirect interest in a proposed transaction with the company, they must declare it to the board.

Consequences of breach

Breach of directors’ duties can result in personal liability, disqualification as a director, and (in cases of fraud or wrongful trading) criminal prosecution. These are not hypothetical risks — Companies House investigations and disqualification proceedings are more common than many founders realise.

Specific obligations worth highlighting

Insolvent trading: If a company becomes insolvent (or is likely to become insolvent), directors’ duties shift to protecting the interests of creditors. Trading whilst insolvent — or taking on new debt when you know the company cannot repay it — can result in personal liability for directors. If your company is in financial difficulty, take insolvency advice immediately.

Filing obligations: Directors are personally responsible for ensuring the company meets its Companies House filing obligations (confirmation statement, accounts) and HMRC obligations (corporation tax, PAYE, VAT). Late filing results in automatic penalties.

When to Get Legal Advice

You don’t need a lawyer to incorporate a company or adopt Model Articles. But for most founders building a real business, legal advice adds genuine value at several points:

  • Choosing the right share structure before you’ve issued any shares (much cheaper than restructuring later)
  • Drafting bespoke articles if you’re taking on investment or have multiple founders with different arrangements
  • Drafting the founders agreement — particularly the vesting and leaver provisions
  • Raising investment — reviewing subscription agreements, shareholders agreements, and investor terms before you sign them
  • Acquiring another company or selling your own

The right time to get legal advice on company structure is before you’ve made decisions that are hard to reverse — not after.

Need legal advice? Get connected with a specialist solicitor →

Need a bespoke version reviewed by a lawyer? Find out about our bespoke document service → from £395.

Frequently Asked Questions

How much does it cost to set up a limited company?

The Companies House registration fee is £50 for online incorporation (£71 for same-day service). Most formation agents charge similar amounts. Beyond registration, you’ll need a business bank account (often free for the first year with major banks) and potentially accounting software. The significant costs come later — accountants, legal advice, company secretary services if needed.

Can I be the sole director and sole shareholder?

Yes. A single-person limited company with one director who is also the sole shareholder is completely valid. Many freelancers and consultants operate this way. You are not an employee of your company unless you enter an employment contract with it — though you’ll typically pay yourself via PAYE as well as dividends.

What is a confirmation statement and when do I file it?

The confirmation statement (previously called the annual return) is a yearly filing to Companies House confirming that the information they hold about your company is correct. It’s due within 14 days of the anniversary of your incorporation date. The filing fee is £34 (online). Failure to file results in Companies House threatening to strike off your company.

Do I need a company secretary?

Since April 2008, private limited companies are no longer required to have a company secretary. However, if your articles require one, you must appoint one. For larger companies, a company secretary provides useful administrative support for statutory compliance.

What is the difference between ordinary shares and preference shares?

Ordinary shares are standard equity — they carry votes, entitle holders to dividends, and participate in sale proceeds. Preference shares typically carry preferential rights to dividends (a fixed rate, paid before ordinary dividends) and/or preferential rights to capital on a winding up or sale. Investors in later-stage rounds often take preference shares to protect their downside.

Can a company own shares in another company?

Yes. A company can be a shareholder in another company. This is the basis for holding company structures, joint ventures, and subsidiary companies. The legal and tax implications of corporate group structures are complex — take advice before creating them.

What happens if I want to change the company name?

Changing your company name requires a special resolution (75% shareholder vote) and a filing at Companies House (£20 fee online). The change takes effect from the date Companies House issues a new certificate of incorporation.

What is a People with Significant Control (PSC) and what do I need to file?

A PSC is any individual who has significant control over a company — broadly, anyone who owns more than 25% of shares or votes, has the right to appoint or remove a majority of the board, or exercises significant influence. PSC details must be filed with Companies House and maintained on the company’s internal PSC register. Failure to comply is a criminal offence.

Get the Foundations Right

Incorporating is the easy part. What matters is having the right legal structure, the right documents, and the right governance in place from the start.

The core documents you need:

For investment rounds and more complex structures, see our Startup Fundraising Guide.

Need legal advice? Get connected with a specialist solicitor →

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