In recent times, many small business owners have resorted to setting up an LLC and the reason is quite direct – it provides liability protection. Businesses that are set up as limited liability companies are entities that are separate from their owners. What that means is that the business alone is responsible for any setback or debt it might face, not the owner. The owners of an LLC are not personally responsible for any debts.
Business owners who are able to set up an LLC have essentially found a way for their business to limit their liability for debts. Starting a limited liability company is not a difficult process, it involves you choosing a business name and filling up the necessary paperwork. You can be sure of your personal assets being protected with proper research and little amount of work.
Note that the legal requirements of setting an LLC up vary in different countries, but this seven-step guide is sure to set you on the right path.
Choose A Name For Your Business
Your LLC needs a name to get registered and potentially to make marketing much easier. But it’s worth bearing in mind that the name of your company does not need to be the same as your trading name. What is essential is that the company name needs to be acceptable to the government companies registration body, Companies House.
There is a standing law that prevents two businesses from choosing the same name. That means if the name you select has been used by someone else, you’d have to change it. Also, you can’t choose a name that could be viewed as offensive or that suggests you have a connection with government or local authorities. Your company name can include the suffix ‘Limited’ or Ltd, but your trading name, if it is different to the company name, must not include Limited/ Ltd.
Do well to check the LLC requirements (naming) from Companies House (the government agency you’d register your company with) and check if the name you intend to use is suitable and hasn’t been used.
Where Do You Want To Set The Business Up?
You need to decide where you want your LLC set up. Even though most business owners prefer creating and registering their LLC where they reside, ensure you do proper research and verify that the legal requirements there would favour you.
There would be nothing wrong with you forming the business in another city, or even potentially another country, sometimes that would make more sense. As you can see at BoostSuite, there are services that can help setting up your business in the USA. Look over their pros and cons and decide which professional service suits your needs.
Decide How Many Directors Your LLC Would Have
It’s important for every limited company to have at least one director; the individual would be responsible for running the company and there can be more directors as there is no limit. The director you get to select has to be 16 years of age and above and be ready to take responsibility (financial or legal) for the company. The director must:
- Do all it takes to ensure the company, using skills, experience, and judgment is successful.
- Ensure there is proper record keeping in the company and report any changes to Companies House and the HM Revenue and Customs (HMRC).
- Keeps the company’s accounts true and fair at all times.
- Pay Corporation Tax and file for Company Tax Return.
- Abide by the rules guiding the company.
- Inform shareholders if there’s a chance you stand to benefit from a transaction the company makes.
- Register for Self Assessment of the company and send a tax return every year except the organization is non-profit and there are no benefits.
These are responsibilities a director must not shy away from or else you would end up facing penalties that might lead to prosecution.
Who Would Be The Shareholders?
Shareholders are individuals or entities that legally own shares in a company and a company that is limited by shares needs to have at least a shareholder(s). That individual will be entitled to place their vote on company matters. The extent to which a shareholder has ownership or power to vote is determined by the percentage and rights of the shares that have been issued to them.
Get The Required Legal Documents
In order to set up an LLC, you’d require a legal statement that has been signed by the shareholders, the Memorandum of Association, the written rules that guide the running of the Company, and articles of association. Those are essentially the standard format when setting up a limited liability company.
Select A Registered Address For The Company
You need to choose an office address registered in the UK when setting up your company. This would be the recognized address where all official communication from HM Revenue, Companies House, and Customs will be sent to. Remember, it has to be a physical address and not a PO Box.
Get Registered With Companies House
Registering with Companies House can be done in several ways – either electronically, through the post office, using Form IN01, or with the help of an incorporation agent.
Setting up a Limited company can be a great option for small business owners. If you are still unsure, check out our article comparing the pros and cons of becoming a Sole Trader v Limited Company. The UK is one of the easiest and quickest countries in the World to set up a LLC. Follow this guide and get your business up and running in no time.