As a smart entrepreneur, you are always looking at the best strategies for your business. If your dream is to employ many people and, one day, sell your business, you could consider trading as a partnership or a limited company. As an individual, however, can you be a limited company?The first answer is potentially a semantics answer. You cannot ‘be’ a limited company as a limited company is separately registered with HMRC and the Registrar of Companies. It is an entirely independent legal entity, as are you. You will each have a separate tax number.The second answer is, yes, you can set up a PRIVATE limited company in the UK with one person. You will need to declare one director and one member (shareholder or guarantor) in the application form, but you can be listed in both of these positions. Thus, an individual can set up a UK PRIVATE limited company at Companies House as the director and member.A PUBLIC limited company (PLC) is different because it needs to appoint at least two directors and a company secretary.This is very practical for entrepreneurs who prefer ‘flying solo’, have no need for a business partner, or benefit from a limited company’s benefits. There is flexibility in that; should you change your mind about a partner in the business, you can add a member or a director. There are very few limitations regarding how you can set up a limited company. You need to be a minimum of 16 years old, not a disqualified director, nor an undischarged bankrupt. Even a non-resident can form a limited company.
What are the requirements of an individual setting up a limited company?
As stated, you declare one director and one member. You must declare a registered office address which will be the official address of your new company. This address has to be in the same jurisdiction in which you are choosing to incorporate.It must be a real, physical address (i.e., not a PO Box number) where official and legal mail can be received. It will be published on the Companies House website as a public record. It is important to keep all your statutory company records there if a public inspection should occur.
How long does it take to set up a limited company?
There are company formation agents who can set up and register a limited company for you. If you prefer to do it independently, you are permitted to do so with the supply of the following details:
Update your company formation application with the SIC code (up to 4 of them).
Declare details of directors, including service addresses
Declare details of members, including service addresses
Memorandum and articles of association (a memorandum states who the founders are, i.e. you) and the Articles of Association are the rules of how the company will be run.
Details of the company’s people with significant control
An agent will get your company registered in 3 to 6 working hours. An independent application may take longer. You can only commence business after its incorporation is confirmed via the receipt of a certificate of incorporation.
Is a partnership a better option than a limited company?
A partnership has a very different structure from a limited company, but both have advantages and disadvantages.A partnership has two or more people owning a business and sharing the responsibility. Here are the pros and cons.
Advantages of a partnership
Tax efficiency – you draw earnings, not a salary through PAYE, and National Insurance contributions are unnecessary.
Unlike a limited company, you do not have to register at Companies House, but you should draw up a partnership agreement via a solicitor.
Disadvantages of trading as a partnership
Joint and several liabilities – This is a biggie. Each partner is equally personally liable to the entire debt of the business.
If one partner cannot afford to repay debt and goes bankrupt, the entire liability falls onto the remaining partner(s).
If a partner leaves a partnership business, they may still be liable if the business becomes insolvent later on.
Shared responsibility – This can often lead to disputes over an individual’s perception of a fair sharing of the workload, especially when non-tangibles like design thinking are involved.