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How do I set up a private limited company?

To form a private limited company, you (or your advisers) need to file an application at Companies House, together with a small fee. The application includes:

  • The proposed name of the company, its registered address, and who the directors will be.
  • A ‘memorandum of association’ giving the names of the shareholders who are forming the company.
  • The ‘articles of association’ setting out how the company will be run (for example, how decisions will be made).

Unless you are going to be the only shareholder and the only director, you need to think carefully about how the company will be run and what rights each individual will have.

If you are setting up the business with someone else, you need to anticipate how decisions will be taken if you disagree and what you will do if you no longer want to work together.

If you are looking for outside investors, they will normally want protections to ensure that they are treated fairly: for example, restricting how much you can pay yourself and what decisions you can take without their agreement, and giving them the right to nominate a director. But at the same time you will not want to accept unreasonable limits on how you manage the company.

You should talk through the key issues with any business partners or investors, and take advice on what agreements you need. While some restrictions can be included in a company’s articles of association, you may well want a separate shareholders’ agreement as well.

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