How to Open a Limited Company in the UK

If you’re setting up a UK business you may be wondering how to open a limited company so you can start to trade legally, safely and in a tax efficient way. Setting up a limited company isn’t too tricky to do, and once you have your LLC, your personal finances are viewed to be separate to your business, adding a layer of protection should your business run into financial difficulties.

This article will walk you through the things to consider before setting up a limited company, how to set up a limited liability company in the UK, and how much it would cost. Plus we’ll introduce Wise Business as a great option to manage your UK company finances across multiple currencies, with the mid-market exchange rate and low fees¹.

If you're a business sending more than 100,000 GBP (or equivalent) monthly across different currencies, get in touch with the Wise Business sales team to discuss the best solutions for your needs.

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Setting up a limited company - FAQs

Before we get into the details of how to open a limited company online or in person, and how to open a limited company bank account to manage your money, let’s work through some common questions.

Still wondering: what is a private limited company? Or maybe you’re debating sole trader vs limited company. Learn more about how to incorporate a UK company in our full guide.

Can you have an LLC in the UK?

LLC stands for Limited Liability Company. This term is usually associated with US businesses, where it’s a popular entity type in its own right. In the UK you can have various business entity types which offer limited liability, which we’ll explore in a moment.

What is an LLC in the UK?

Generally if you hear someone talking about an LLC in the UK, they’re likely to be referring to a limited company. In fact, there are several types of business entity in the UK which offer the owners and directors a degree of limited liability, including:

• Limited company (shortened to Ltd)
• Public Limited Company (shortened to PLC)
• Limited Liability Partnership

Each of these business types has its own features, advantages and disadvantages. Which is right for you will depend on the type of work you do and your personal preferences and business plans. This guide will focus on limited companies in the UK, but we’ll also take a quick look at some other potential entity types you might consider in a moment.

What is a private limited company?

So, what is a private limited company, and for that matter, what is a public limited company?

Let’s start with public limited companies. These companies are publicly listed and shares in them can be bought and sold on the stock market. To found a PLC you’ll need a significant investment to form your share capital, at least 2 directors and a company secretary.

This guide will look more carefully at private limited companies² - Ltd companies. These can be limited either by shares or by guarantee - if you’re running a profit making business you’ll probably opt for a company which is limited by shares. This type of business entity is legally separate to the owner and directors, holds its finances separately to your personal finances, and must have at least one named shareholder. The owners of this type of business can keep any profits after tax for themselves or to reinvest.

Sole trader vs limited company - what is the difference?

Being a sole trader - also known as being self employed - is not the same as opening a limited company in the UK.

The primary difference between these two business entity types is that as a sole trader, your personal finances are not separate from your business finances. This makes it simpler in terms of accounting and the reporting requirements that apply - but also means you take a personal risk if your business runs into financial problems.

If you’re eligible to register as a sole trader, and choose to take this route instead of opening a Ltd business, the process is pretty much as simple as telling HMRC you’ll pay tax by self assessment³.

How much does it cost to open a limited company in the UK?

In the UK it is relatively cheap compared to other developed countries to register a Ltd company. Below are estimated costs you’ll incur in setting up your own limited company, depending on the way you choose to proceed:

• Directly, via the Companies House Web Incorporation Service – takes up to 24 hours (£12)⁴
• Directly, by post, using Form IN01 – this takes 8 to 10 days (£40)⁵
• Via an intermediary, such as a formations agent (various prices)
• Via an accountant (various prices, sometimes included if you sign up as a client)
• Using the Wise Business company formation tool, where you can create a limited company in the UK and open a Wise Business multi-currency account in one go

On top of that some other costs may apply, such as professional indemnity insurance, which can be in the range of £300 - £400 per year for £1 million or more coverage. Of course, you may also incur other business set up costs such as capital expenses for equipment or supplies, and to cover marketing or other common expenses. Have a full budget in mind depending on the type of business you’re setting up, before you get started, to give your company the best chance of success.

How to open a limited company bank account

One of the first things you’ll need to do as part of registering your limited company is to get a company bank account to hold your business funds separately to your personal money. Opening a business account with a bank can be done online, or in some cases you’ll be asked to attend a branch in person. Usually the steps you’ll need to take include:

1. Research bank business account options and pick the right one for you
2. Check your eligibility for the account, and how to apply
3. Gather the documents needed - usually ID and proof of address for the owner, directors and significant shareholders, plus business registration documents
4. Apply online or in person, depending on the specific bank
5. Once your account is verified you’ll be sent all the information you need to operate your account, and can start to transact

As different banks have their own processes - which can also vary depending on your specific situation and business type, you’ll need to double check the requirements directly with your preferred bank before you start your application.

As an alternative to a bank, you might also want to consider Wise Business which has an account you can open online or in Wise's app, to hold 40+ currencies, send and receive international payments, and spend around the world with linked debit and expense cards. Here’s how to apply for a Wise Business account:

1. Download the Wise app or head to the Wise desktop site
2. Tap Register and follow the prompts to apply for a business account
3. Add your personal and contact information
4. Upload the documents needed which are detailed online and in this Wise Business account requirements guide
5. Pay the one time fee to register your account and get a linked payment card if you need one
6. Once your account is verified you can start transacting - your account will be live in the Wise app, your physical card will be posted to you, and you can get a digital card right away for mobile spending

Wise stands out thanks to its powerful multi-currency features which are perfect for businesses with customers, contractors or suppliers overseas. You can receive payments from abroad for free (or for a low fee, depending on the currency), convert between currencies in the account with the mid-market exchange rate and fees from 0.43%, and make multiple payments to your suppliers and contractors in just a few clicks.

You can also take advantage of the following business features:

• Order a multi-currency debit card, or expense cards for your team
• Multi-user access so your can make sure your team can access the financial tools they need to do their job
• Linkable to accounting software such as Xero
• Automated payments through open API to save you time and streamline the process

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How to open a limited company in the UK - Step-by-Step

Let’s walk through a step by step guide to opening a limited company in the UK⁶.

Choose an available and suitable name

You should choose an exclusive company name and check existing trademarks. Make sure your name doesn’t break any rules on what companies in the UK can be called - and be sure to think about how customers will react to the name you pick.

Choose shareholders or guarantors, and directors

Identify the people who will be involved with creating and running your company. You need at least one director, and one shareholder. A shareholder can also be a director, and if you’d like to you can appoint a company secretary at this point, too. Aside from this you’ll need to identify people with significant control over your company as they’ll often need to be involved in processes like getting verified for a bank account. This usually includes anyone with a 25% or more stake in the business or with voting rights.

Prepare paperwork showing how you agree to run your company

Form your company following the incorporation process; fill-out documents needed such Memorandum of Association and Articles of Association. You may decide to take professional advice to support this step, or go it alone.

Register your company

Register your company with Companies House. You can do this directly online for the cheapest and easiest option - or have a third party agent or formation company support this step if you’d prefer. You’ll usually register for tax at the same time.

Comply with the government’s tax requirements

When you set up your limited company, you automatically get different reporting dates for the first: (a) annual accounts you send to Companies House (b) Company Tax Return you send to HM Revenue and Customs (HMRC). You may also have to file 2 tax returns to cover your first year in business.

Open a Business account

Once you’ve formed your company, you will need a business bank account to monitor the company’s flow of funds; it must be separate from your personal bank account. Set up a business bank account with your company’s credentials and address.

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Manage your company's finances with Wise Business

Check out Wise Business as an easy to use solution for managing your company finances in the UK and across borders. Wise Business account has a low one time setup fee, and then no ongoing costs or minimum balance requirements to worry about.

You’ll be able to hold 40+ currencies, get paid with local bank details in GBP and 8 major foreign currencies, and get loads of business friendly perks to save time and money too.

Where Wise really stands out is in sending and receiving international payments.. You’ll get the mid-market exchange rate with Wise, with all costs split out for transparency so you can see what you’re really paying for currency services. The Wise exchange fee can be as little as 0.43%, driving down the costs of doing business across borders, and helping you to connect with customers around the world more easily.

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So there you have it - a full guide to opening a limited company in the UK. The process isn’t too tricky, and there’s lots of online and in person help out there if you need it - but it can still feel a bit daunting to get started. Use this guide to help figure out the steps you need to take - and don’t forget to take a look at Wise Business as a perfect partner if you have a business with global ambitions.

Sources used in this article:

Sources last checked Dec 20, 2023