Setting up a limited company in the UK is one of the easier administrative acts available to a citizen. It can be done online in about twenty minutes, costs a modest filing fee, and is usually approved within twenty-four hours. The ease is deceptive. Incorporation creates a separate legal person with continuing statutory obligations, and the reason people run into difficulty is almost never the registration itself.
Whether you need one at all
Sole trader status requires no incorporation, no annual accounts filed publicly, and far less administration. It also offers no separation between you and the business: personal liability for debts is unlimited. A limited company creates that separation, generally allows more tax-efficient extraction of profit above a certain level, and gives clients and suppliers a structure they may prefer to deal with. Below roughly the point at which profits exceed what you need to live on, the administrative cost of a company frequently exceeds its benefit. The comparison is set out on the government business setup pages.
What incorporation actually requires
You register with Companies House. You need a company name that is not already taken and does not use restricted words, a registered office address, at least one director aged sixteen or over, at least one shareholder, a statement of capital describing the shares, and details of people with significant control. You also need to adopt articles of association, and the model articles supplied by default are adequate for most single-director companies.
Two details catch people out. The registered office address is public, which is why using a home address is a decision rather than a default, and services providing a registered office cost very little. And since the Economic Crime and Corporate Transparency Act 2023 came into force, Companies House has taken on identity verification duties for directors and people with significant control, a change explained through the Companies House guidance. The days of anonymous shell incorporation are ending.
The obligations that follow
A company must file a confirmation statement at least once a year, confirming that the registered information is still correct. It must file annual accounts, which are public, though small companies may file abridged versions. It must file a corporation tax return with HMRC and pay corporation tax within nine months and a day of the accounting period end. If turnover exceeds the VAT threshold it must register for VAT, and it must operate PAYE if it pays anyone, including a director taking a salary.
Missing a filing deadline generates automatic penalties that escalate, and persistent failure can lead to the company being struck off and the director being disqualified. This is the single most common way that small companies fail administratively rather than commercially. Detail on the deadlines and penalties sits with HM Revenue and Customs.
Directors’ duties are real obligations
The Companies Act 2006 sets out seven statutory duties for directors, including acting within powers, promoting the success of the company, exercising independent judgement, exercising reasonable care and skill, avoiding conflicts of interest, not accepting benefits from third parties, and declaring interests in transactions. These apply to a sole director of a one-person company exactly as they apply to a board member of a listed business.
The duty that matters most practically concerns trading while insolvent. Once a director knows or ought to know that the company cannot avoid insolvent liquidation, the duty shifts towards minimising loss to creditors, and continuing to trade can expose the director personally. Guidance for directors in that position is published by the Institute of Chartered Accountants in England and Wales and taking advice early is materially cheaper than taking it late.
Practical sequence
Check the name is available and that the matching domain is too. Decide the registered office. Register with Companies House. Open a business bank account, which will take longer than the incorporation. Register for corporation tax within three months of starting to trade. Set up bookkeeping from the first transaction rather than reconstructing it in month eleven. Decide whether you need an accountant, and for most companies the answer is that the fee is less than the cost of the mistakes.
More business coverage: the employment rights every UK worker has, and our full business section.
Where to check the detail
Before filing, it is worth reading the small-business guidance published by the Federation of Small Businesses, which covers the practical decisions that follow incorporation rather than the registration itself. Employment obligations begin the moment a company takes on its first member of staff, and the authoritative source on contracts, notice and statutory entitlements is Acas. If you plan to trade under a name that differs from the registered one, check the trade mark position through the Intellectual Property Office guidance before investing in branding, because a company registration confers no trade mark rights at all. For related reading, see the employment rights every UK worker has and how council tax is calculated.
