11 Things You Must Know When Starting a Limited Company
Starting a limited company is an exciting step towards growing your business and establishing a professional presence. But before you start, it’s important to understand the responsibilities that come with running a limited company. From legal obligations to financial requirements, getting it right from the start can save you a lot of time and trouble down the line.
Whatever stage of business you’re at, Joanna Bookkeeping is here to help. Whether you need advice on getting started, growing, or tax support, book a free consultation with our Oxford and Wantage accountant and discover how we can support you.
Here are 11 essential things you must know before setting up a limited company.
1. You Must Register with Companies House
Before you can start trading as a limited company, you must register with Companies House. This process officially creates your business as a separate legal entity, meaning that it is distinct from you as an individual. Until this is done, you cannot legally operate under your limited company’s name.
The registration process involves choosing a company name, appointing at least one director, and providing a registered address. Once your company is incorporated, you will receive a Certificate of Incorporation, confirming that your business is legally recognised.
2. You Must Report to Both HMRC and Companies House
Unlike sole traders, who only report to HMRC, limited companies have two organisations to report to:
HMRC – You must submit a Corporation Tax Return each year, detailing your company’s profits and tax liabilities.
Companies House – You must file annual accounts and a confirmation statement to keep your company’s records up to date.
Failing to submit these documents on time can lead to penalties and potential legal action, so it’s crucial to stay on top of your reporting responsibilities.
3. You Must Have a Business Bank Account
When starting a limited company it’s also important to know that you must have a separate business bank account in your company’s name. Unlike sole traders, who can use their personal accounts, limited companies are legally separate from their owners.
A business bank account ensures that your company’s finances remain distinct from your personal funds, making bookkeeping, tax reporting, and financial management much easier.
4. You Must Have a Registered Address
Every limited company must have a registered office address and this registered address:
➡️Must be a physical address (not a PO Box).
➡️Will be publicly visible on the Companies House register.
➡️Is where Companies House, HMRC, and other government bodies will send official correspondence.
If you don’t want to use your home address, you can still start a limited company and use a registered office service. Directors and shareholders can also use a service address to keep their personal address private.
5. You Must Have a Registered Email Address
Companies House requires every limited company to have a registered email address. This email address will be used to send you official notifications, reminders, and important legal updates.
Unlike your registered office address, this email address is not publicly visible, so you don’t need to worry about privacy concerns.
6. Your Company Name Must Be Unique
Choosing a name when starting a limited company is an important step. Your registered company name must not be the same as an existing company’s name. Before registering, check the Companies House name availability checker to ensure your desired name is available.
Your company name must also comply with legal requirements, meaning it:
➡️Cannot be offensive.
➡️Cannot contain restricted words (unless you have permission).
➡️Must include “Limited” or “Ltd” at the end.
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7. You Can Have a Trading Name Different from Your Registered Name
Your company’s registered name is its official legal name, but you don’t have to use it in your branding. You can operate under a trading name (also called a business name), as long as:
➡️It does not include “Limited” or “Ltd”.
➡️It is not identical to another registered company’s name.
➡️It does not contain restricted words without permission. For example, if your registered company is ABC Consulting Ltd, you might trade as ABC Consulting or ABC Business Solutions.
8. You Must Have at Least One Director and One Shareholder
A limited company must have at least:
One director – responsible for managing the company and ensuring it meets legal obligations.
One shareholder – the person who owns shares in the company (this can be the same person as the director).
This means that you can be both the director and the sole shareholder of your company, giving you full control over decision-making.
9. As a Director, You Are Legally Responsible for Compliance
When you become a director of a limited company, you take on legal responsibility for:
➡️Submitting Corporation Tax Returns to HMRC.
➡️Filing Annual Accounts and Confirmation Statements with Companies House.
➡️Ensuring the company follows all statutory requirements.
Failure to meet responsibilities as a director of a limited company can result in fines, prosecution, or even being banned from acting as a director.
You can appoint an accountant to handle your financial reporting, but you are still legally responsible for ensuring everything is done correctly.
10. You Must Keep Business Records
Limited companies must keep business records for at least six years, including:
➡️Accounting records (bank statements, invoices, receipts, tax returns).
➡️Company records (meeting minutes, shareholder agreements, statutory registers).
➡️PAYE records (if you have employees).
Keeping accurate records is essential for tax compliance and can help you avoid costly penalties if HMRC ever investigates your business.
11. Not All Costs Are Allowable for Tax Purposes
Just because you spend money on your business doesn’t mean you can deduct it from your taxable profits. Some costs, while legitimate, are not allowable for tax purposes.
For example, client entertainment is a common expense that cannot be claimed as a tax-deductible business cost. Understanding what is and isn’t allowable can help you:
➡️Avoid surprises when filing your tax return.
➡️Manage your cash flow effectively.
➡️Make informed decisions about spending and investments.
If you’re unsure about tax-deductible expenses, working with an accountant can help you navigate the rules and avoid costly mistakes.
Starting a limited company comes with many benefits, but it also carries responsibilities. From registering with Companies House to managing your tax obligations, understanding these key factors will help you stay compliant and set your business up for success.
At Joanna Bookkeeping, we help business owners navigate the complexities of running a limited company, ensuring you stay compliant and in control of your finances. Whether you need help with tax returns, annual accounts, or general bookkeeping, we’re here to support you.
Thinking of starting a limited company? Or need help managing your existing one? Book a free consultation with Joanna Bookkeeping today and let’s make sure you’re on the right track.
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