What is a Ltd company in the UK? Why is it worth setting one up?

What is a Ltd company in the UK? Why is it worth setting one up?

Because of the often complicated formalities of running a business in Poland and the tax system in force there, many Polish entrepreneurs decide to set up their own business abroad. The most common choice in such cases is the United Kingdom. This is driven by clear and favourable regulations that support enterprise, as well as the fact that running a Ltd company does not require living in the UK. What does registering a business look like, and what are the benefits of setting up a Ltd company?

The Ltd company in the UK: the basics

The limited company is one of the most popular ways of running a business in the UK. A Ltd company has its own legal personality, separate from its founder and the people running it. This means the director and shareholders are not liable for the company’s obligations with their private assets.

• The limited company is sometimes described as the equivalent of the Polish spółka z o.o. (limited liability company). Remember, however, that the two forms operate under different laws, so before setting up a company in England it is worth getting thoroughly acquainted with what British regulations offer and what obligations they impose.

Types of Ltd companies in the UK

There are three main types of companies in the UK: the public limited company, the private company limited by shares, and the private company limited by guarantee.

In all cases, the companies are legally and financially separate from the people who run them. Public limited companies and private companies limited by shares have shares and shareholders, and keep the profits they make after paying their tax liabilities. One of the basic differences is that in a public limited company, shares can be offered for sale to the public. A private company limited by guarantee, in turn, is often a ‘not for profit’ company - instead of shareholders it has guarantors and invests its profits back into the business.

How do you set up a Ltd company in the UK?

It is worth starting with the fact that setting up a company in England is far simpler and faster than in Poland. Using the online registration option, a company in the United Kingdom can be registered in as little as 24 hours.

What do you need to set up a Ltd company?

• A name: Every company must have a unique name. This means you cannot register a business under a name already used by another registered company.

• A registered office address: When setting up a limited company, you must provide a registered office address to which official correspondence to the company will be sent. It must be a British address appropriate for the country of registration (for example, a company registered in England must have an English address). You can use an agent’s address for this purpose. It is worth keeping this option in mind, because this information will be publicly available.

• A director: A Ltd company must have at least one director. No formal qualifications are needed to become a company director - you just need to be at least 16 years old, not be disqualified from acting as a director by a court, and not be an undischarged bankrupt.

• A shareholder: A Ltd company must have at least one shareholder (or guarantor in the case of a company limited by guarantee), and this can be the same person as the director.

• Memorandum of association: An official statement signed by all the initial shareholders agreeing to form the company. If you register online, it will be created automatically.

• Articles of association: A document setting out the rules for running the company, agreed and approved by the shareholders.

How do you register a Ltd company?

A limited company in the UK must be registered with Companies House. Within 3 months of starting to trade, it must also register with HMRC for Corporation Tax.

A company can be registered:

• Online: Registration costs £12 and usually takes 24 hours. A big advantage is that the online option lets you register with Companies House and HMRC at the same time.

• By post: Registration costs £40 and takes 8 to 10 days.

• Through an agent: This is a good option for those who do not want to handle the formalities themselves. We provide this service at PolAccount too - our specialists will make sure the documents are submitted correctly and provide comprehensive support from the moment your company starts operating.

How does a Ltd company work in the United Kingdom?

The day-to-day running of the company is the responsibility of the director (or directors). The director’s duties in a Ltd company include:

• acting in line with the rules set out in the articles of association,

• keeping company records and reporting changes,

• filing accounts and tax returns, as well as paying Corporation Tax.

Importantly, the director can hire someone else to carry out these tasks, but still retains the legal responsibility attached to them. In order to pay a salary to the director or other employees, the company must be registered as an employer.

Why is it worth setting up a Ltd company in the UK?

The United Kingdom is a very stable environment for growing a business, because it offers a high degree of flexibility, clear regulations, and attractive solutions for entrepreneurs. On top of that, even people living abroad will not run into many obstacles when setting up a business as a Ltd company. It is, for example, a great solution for people in Poland who work remotely, as freelancers or on contracts, and do not need permanent premises - in such cases a Ltd company offers many benefits.

Setting up a Ltd company in the UK does not require a large financial outlay - the company’s share capital can be as little as 1 pound!

By choosing to run a business in the UK, Polish entrepreneurs can also count on more favourable taxation of their income. The tax-free Personal Allowance in the United Kingdom is considerably higher than in Poland. In Poland this amount currently stands at 30,000 zloty, while in the UK it is £12,570, or around 63,000 zloty.

The director of a Ltd company is also its employee, which means they benefit from all the tax reliefs available to ordinary employees. They also have the option of taking their pay in the form of dividends, which make it possible to avoid National Insurance charges.

The Ltd company versus other forms of business in the UK

When setting up a company in England there are several options to choose from, but the Ltd company is by far the most cost-effective form. Its main advantage is that it lets you save on taxes, which is impossible, for example, with self-employment.

It is also worth knowing that a Ltd company has its own legal personality. Thanks to the separation of the company’s finances from your private ones, you bear no financial consequences in the event of bankruptcy. Another big advantage is the credibility of limited companies, which automatically increases trust in the brand.

Need help with taxes in the United Kingdom? Choose PolAccount!

Setting up a Ltd company is not complicated, but it can be a challenge for those unfamiliar with British regulations. By choosing PolAccount, an accountancy office in London, you will gain the support you need when setting up and running your company. Our specialists know exactly how to handle a UK Ltd company’s accounts so as not only to meet all the requirements, but also to secure the maximum benefits for you. Feel free to get in touch!