Should You Set Up a Limited Company? A Guide for Small Business Owners in the UK

Running your own business is exciting – the freedom, the flexibility, the thrill of making your own decisions (and your own money). But when it comes to choosing the right structure for your venture, things can get murky fast. If you’ve been operating as a sole trader or are just starting out, you’ve probably wondered:“Should I set up a limited company?”

Let’s break it down – and share a few golden nuggets that most accountants forget to mention.

When Should You Consider Setting Up a Limited Company in the UK?

There’s no one-size-fits-all answer, but here are some solid indicators that it might be time:

• You’re making over £30,000–£40,000 profit annually – Limited companies are generally more tax-efficient once your earnings cross this threshold.

• You want to protect your personal assets – A limited company is its own legal entity. That means your home, car, and personal savings aren’t automatically on the line if the business hits a bump in the road.

• You’re working with big clients or corporates – Many larger firms prefer (or require) contractors and suppliers to operate through a limited company.

• You’re thinking long-term – Want to bring in partners, attract investment, or eventually sell your business? A limited company is often the smoother path.

Pro tip: Even if your income is lower now, setting up a limited company early can help you build a clean, professional track record – great for future funding or selling.

How to Register a Limited Company (Step-by-Step)

Setting up a company might seem daunting, but it doesn’t have to be. Here’s what’s involved:

1. Choose a name – It needs to be unique and not too similar to existing companies.

2. Register with Companies House – This includes selecting your SIC code, appointing directors, and outlining share structures.

3. Set up a business bank account – Essential for keeping things squeaky clean.

4. Register for Corporation Tax – Within 3 months of trading. Easy to forget. Easier to get fined if you do.

   
   

Why Use an Accountant to Register a Limited Company?

This is where we come in. We don’t just tick boxes – we make sure your structure is right for you. We’ll:

• Register your company with Companies House

• Help you open a business bank account (we have preferred partners with perks)

• Sort Corporation Tax, VAT (if needed), and PAYE registration

• Advise on the best share structure for your current and future goals

• Set you up with cloud accounting software to make record-keeping a breeze

Our difference? We offer a “Start Smart” session to help you understand why we’ve made certain decisions. It’s like having a CFO on speed dial – without the six-figure salary.

Your Legal and Financial Responsibilities as a UK Company Director

Setting up a limited company brings responsibilities. Here are the essentials:

You must:

• File annual accounts and a confirmation statement with Companies House

• Submit Corporation Tax returns and pay tax on profits

• Run payroll if you pay yourself a salary (we recommend you do – but in a smart, tax-efficient way)

• Keep good financial records and hold onto them for 6 years

Don’t Forget:

• Insurance – Especially professional indemnity or public liability if you’re client-facing

• Separate bank accounts – Never mix personal and business money

• Plan for dividends – They’re not magic money; they require profits and documentation

Smart Extras Most Accountants Don’t Mention

• Think beyond your name – Your company name is your first impression. We help clients pick strategic names with SEO, branding, and scalability in mind.

• Get a director’s service address – Don’t want your home address publicly available online? You don’t have to. We can arrange a registered office and director service address.

• Consider succession – You might not be planning to sell or pass your business down just yet, but putting the right share structure in place now can save a world of pain later.

• Pay yourself wisely – The ideal mix of salary and dividends isn’t just about tax – it can affect mortgage applications, maternity pay, even state pension entitlements. We look at the full picture.

Book a Free 'Start Smart' Session With Our Experts

Thinking about going limited? We’re not just accountants – we’re partners in your journey. Whether you’re just starting out or scaling up, we’ll help you build a business that’s not only profitable but sustainable and future-ready.

Get in touch to book your free “Start Smart” consultation and we’ll map it all out with you.

Your future limited company is just a few smart decisions away.