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Setting up a Limited Company

If you are thinking of setting up your own private limited company, chances are more than one person will have asked you this one simple question – why? After all, setting up a limited company will involve more administration and cost you more money than being a humble sole trader.

Well, whilst this may be true to some extent, it doesn’t tell the whole story.

Indeed, the answer as to whether or not you should set up a private limited company is likely to be determined by the issue of personal financial liability. If you’re a sole trader and your business fails, then you are personally liable for its debts. Naturally, this can result in you becoming personally bankrupt if the debts you incur are considerable enough. Setting up a limited company on the other hand provides you with protection against such circumstances.

The Appeal of a Limited Company
A limited company is a separate legal entity and therefore it is legally responsible for its own actions. This means that the finances of private limited companies are entirely separate from those of its owner(s). Private limited companies can have one or more shareholders, however shares cannot be sold publicly i.e. on the stock market (unlike public limited companies).

As long as you don’t trade recklessly or fraudulently, your risk (as a director of the company) of loss is restricted to the money you’ve invested in the company (of course, you are still liable for any bank loans if you provide personal guarantees for that limited company).

So, it is clear to see that once you dig a little deeper, the prospect of setting up a limited company is actually quite appealing.

Setting up a Limited Company
To become a limited company, you need to register with Companies House. In essence, all you need do to register your limited company with Companies House is provide them with the information they require and sign and date the right corporate documents.

Ready-made limited company names are available to buy, should you wish to go down this avenue. However, if you want form a brand new limited company then you will need to send a Memorandum of Association, Articles of Association and a completed IN01 form to Companies House.

A Memorandum of Association details the limited company’s name, registered office and nature of business, and must be signed by the director(s) in front of a witness. A registered office is the official limited company address, which is where Companies House will send notices, letters and reminders. The Articles of Association sets out the rules for the running and regulation of the company.

Companies House do not supply memorandum and articles, however, they are readily available from us here at Simpy-docs. Indeed, our Company Formation Documents Sub-folder provides a range of document templates, guidance notes, and other supporting legal forms for those who are looking to form a new company.

To find out more, simply browse our pages further or call 020 8878 7236.

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