Short answer
You set up a limited company by registering it with Companies House, which costs £100 online. You need a name, a registered office, at least one director and shareholder, and articles of association. Since 18 November 2025 every director and person with significant control must verify their identity with Companies House.
Should you be a sole trader or a limited company?
A sole trader is the simplest way to start. You register with HMRC for Self Assessment and keep all the profit after tax, but you have unlimited personal liability for business debts. You must register as a sole trader if you earn more than £1,000 from self-employment in a tax year.
A limited company is a separate legal person. Shareholders' liability is limited to what they invest, the company can own assets and sign contracts, and it is easier to bring in investors. In return you file accounts and a confirmation statement at Companies House and your details are on a public register. Companies pay Corporation Tax at 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between.
Limited liability has limits: banks and landlords often ask directors for personal guarantees, and directors can be personally liable for wrongful trading or breach of duty.
How do you set up and register a limited company?
You register a company with Companies House. You will need:
- a company name that is not the same as an existing one and follows the naming rules
- a registered office address in the UK that is an appropriate address (not a PO box) and a registered email address
- at least one director, and at least one shareholder
- details of people with significant control (PSCs), usually anyone with more than 25% of shares or votes
- a statement of capital and a SIC code describing what the company does
- a memorandum and articles of association
The fee is £100 online (£124 by post). You must then register for Corporation Tax within three months of starting to do business.
Do directors and PSCs need to verify their identity?
Yes. Under the Economic Crime and Corporate Transparency Act 2023, identity verification became a legal requirement on 18 November 2025. You verify once, either through GOV.UK One Login or through an Authorised Corporate Service Provider such as an accountant, and receive a Companies House personal code.
- New directors and PSCs must verify before they are appointed or registered.
- Existing directors must give their personal code with the company's next confirmation statement during the 12-month transition, which ends in November 2026.
- Existing PSCs have separate deadlines, such as within 14 days of the confirmation statement date if they are also a director.
Failing to verify on time is an offence and can lead to a financial penalty. Verification for people who file on behalf of companies will follow later. See when you need to verify your identity.
What are articles of association?
Articles of association are the company's rulebook: how directors make decisions, how shares are issued and transferred, and how shareholders vote. Many small companies adopt the model articles set out in the Companies (Model Articles) Regulations 2008. Articles are public, and can be changed by a special resolution passed by at least 75% of votes. Founders with investors usually need tailored articles that cover share classes, leaver rules and transfer restrictions.
What are a company director's legal duties?
The Companies Act 2006 (sections 171 to 177) sets out seven general duties. A director must:
- act within the company's constitution and powers
- act in the way they consider most likely to promote the success of the company for its members as a whole
- exercise independent judgment
- exercise reasonable care, skill and diligence
- avoid conflicts of interest
- not accept benefits from third parties
- declare any interest in a proposed transaction with the company
Once a company is insolvent or close to it, directors must also consider the interests of creditors.
What are a company director’s fiduciary duties?
Under the Companies Act 2006, a company director's fiduciary duties are the core legal responsibilities of loyalty, honesty, and good faith owed directly to the company. While the Act codifies seven general duties for directors under sections 171 to 177, the specific fiduciary duties, grounded in trust, include the duty to act within powers according to the company’s constitution, promote the success of the company for the benefit of its members as a whole, and exercise independent judgment. Crucially, directors must also strictly avoid conflicts of interest, refuse benefits or bribes from third parties, and declare any personal interest in proposed transactions or arrangements. These principles ensure that a director always prioritises the company's financial and legal well-being over their own personal gain.
Do you need a shareholders agreement or founder agreement?
A shareholders agreement (between early-stage founders often called a founder agreement) is a private contract between the shareholders that sits alongside the articles. It is not legally required, but it is the main way founders avoid expensive disputes. It usually covers:
- who can appoint directors and which decisions need unanimous or majority approval
- what happens if a founder leaves, including good leaver and bad leaver terms
- vesting, so a founder earns their shares over time, often four years with a one-year cliff
- pre-emption rights, drag-along and tag-along rights on a sale
- deadlock and dispute procedures
Libra has lawyer-drafted shareholders agreement (2 parties) and shareholders agreement (3 parties) templates, plus a deed of adherence for new shareholders joining an existing agreement.
Other core startup legal documents are a written transfer of intellectual property from each founder to the company, written statements or consultancy agreements for anyone who works for you, and website terms and a privacy notice if you trade online.
How do you issue new shares, and what if shareholders fall out?
To issue shares, directors need authority, which in a private company with one class of shares they usually have unless the articles say otherwise. Existing shareholders normally have statutory pre-emption rights to be offered new shares first, unless these are disapplied. You must file form SH01 (return of allotment) at Companies House within one month and update the register of members.
In a shareholder dispute, start with the shareholders agreement and articles. A shareholder whose interests are unfairly prejudiced can petition the court under section 994 of the Companies Act 2006, and the usual remedy is an order for their shares to be bought at a fair value. Directors can be removed by an ordinary resolution (more than 50% of votes) with special notice.
What are the key deadlines and time limits?
Missing a Companies House deadline can mean automatic penalties and, eventually, the company being struck off.
- Before appointment: new directors and PSCs must verify their identity with Companies House.
- Next confirmation statement (transition ends November 2026): existing directors must supply their personal code.
- 3 months: register for Corporation Tax after the company starts doing business.
- 1 month: file form SH01 after allotting new shares.
- Every 12 months: file a confirmation statement (£50 online).
- 9 months after year end: file annual accounts for a private company (21 months after incorporation for the first accounts).
What should you do next?
- Decide between sole trader, partnership or limited company based on risk, tax and plans for investment.
- Verify your identity with Companies House before registering as a director or PSC, and collect personal codes from co-founders.
- Register the company, choose model or tailored articles, and register for Corporation Tax within three months.
- Put a shareholders agreement in place early, using the Libra shareholders agreement template, with vesting and leaver terms.
- Ask Libra to explain your duties as a director or to check your articles and shareholders agreement fit together.
- For investment rounds or shareholder disputes, find a lawyer or clinic through Libra.
Frequently asked questions
How long does it take to register a limited company?
Online applications to Companies House are usually processed within 24 hours, though checks can take longer. Every director and PSC must have verified their identity first, so allow time for GOV.UK One Login checks or for an Authorised Corporate Service Provider to complete verification.
Can I be the only director and shareholder?
Yes. A private limited company can have a single director who is also the only shareholder. The director must be at least 16 and verified with Companies House. You still owe the statutory duties and must keep company decisions and money separate from your own.
What happens if an existing director does not verify their identity?
Existing directors must supply their Companies House personal code with the company's next confirmation statement during the transition period ending in November 2026. If they do not, they commit an offence, the company is in default, and they can face a financial penalty. They also cannot file for the company.
What is the difference between articles of association and a shareholders agreement?
Articles are the company's public constitution, binding on the company and all shareholders, and changeable by 75% of votes. A shareholders agreement is a private contract, binding only on those who sign it, and usually needs everyone's consent to change. Most companies with more than one founder need both.
What is a vesting schedule for founders?
Vesting means a founder's shares are earned over time. A common UK approach is four years with a one-year cliff, applied through leaver provisions in the articles or shareholders agreement: a founder who leaves early must sell unvested shares back, often at nominal value. Get tax advice on the structure.
What are the ongoing filing deadlines for a limited company?
A confirmation statement must be filed at least once every 12 months (£50 online). A private company's annual accounts are due nine months after its financial year end, and its first accounts 21 months after incorporation. The Company Tax Return is due 12 months after the end of the accounting period.
How much does it cost to set up a limited company?
Registering online with Companies House costs £100 from 1 February 2026. Many people also pay for a registered office address, an accountant and sometimes a bespoke shareholders agreement. The annual confirmation statement is £50 online. Check the Companies House fees page for the current figures.
Can I use my home address for my company?
Yes, but your registered office address is public on the register. Directors must also give a service address, which can be the same as the registered office. Your home address as a director is held privately unless you choose to disclose it. You can use a professional address instead.
Can I pay myself a salary and dividends from my company?
Yes. Directors commonly take a modest salary and then dividends. Dividends can only be paid from available profits, and must be declared properly with paperwork. Paying them when there are no profits can make the money repayable and create personal liability for directors.
Am I personally liable if my limited company gets into debt?
Usually not, because a company is a separate legal person. You can lose your investment, but personal liability can arise if you gave a personal guarantee, traded while insolvent, or acted wrongfully as a director. Limited liability is not a shield for wrongdoing.
Can I change my company name after setting it up?
Yes. You can change it by special resolution, which needs 75% of votes, and then notify Companies House with the fee. The new name must not be the same as, or too like, an existing name, and cannot be offensive or misleading.
What happens if I miss the deadline for filing company accounts?
Late filing gives an automatic penalty that increases with how late you are, starting at £150 and rising to £1,500 for private companies, doubled if late two years running. Directors can also be prosecuted, and persistent default can lead to the company being struck off.
Can I close my limited company if it is not trading?
Yes. If it has no debts and has not traded recently, you can apply to Companies House to strike it off for a fee of £13 online. You must tell creditors, HMRC and employees. If it owes money, you may need a formal insolvency process instead.
Ask Libra
- How much does it cost to set up a limited company?
- Can I use my home address as my company address?
- Should I pay myself a salary or dividends from my company?
- Am I personally liable for my limited company's debts?
- What are my legal duties as a company director?
- My co-founder wants to leave. What happens to their shares?
Sources
- Set up a private limited company (GOV.UK)
- When you need to verify your identity for Companies House (GOV.UK)
- Companies House fees (GOV.UK)
- Companies Act 2006, directors' general duties
- Companies (Model Articles) Regulations 2008
- Economic Crime and Corporate Transparency Act 2023
- Set up as a sole trader (GOV.UK)
- Corporation Tax rates (GOV.UK)
This guide is general information about the law in England and Wales as at September 2026, not legal advice. For advice on your situation, ask Libra or find a lawyer through Libra.
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