Are you considering setting up a limited company in the UK? If so, one of the first questions that might come to mind is, “How many people do I need to form a limited company?”
This article aims to answer that question and provide you with a comprehensive understanding of the process involved in forming a limited company.
A limited company is a type of business structure where the company’s finances are separate from the personal finances of the owners. This structure offers a range of benefits, including limited liability, tax efficiencies, and a professional image.
But how many people do you need to get started?
Can You Set Up a Limited Company with One Person?
The short answer is, yes, you can set up a limited company in the UK with just one person.
The application form requires you to list a minimum of one director and one member, who can be a shareholder or guarantor. Interestingly, the same individual can occupy both of these positions. This means that a single person can set up a UK limited company at Companies House.
This is particularly beneficial for many small business owners who prefer to work alone or have no need for a business partner. Moreover, the limited company structure is incredibly flexible, allowing additional members and directors to be brought in at any time after the initial company formation.
Almost anyone can set up a limited company in the UK, provided they are at least 16 years old and are not a disqualified director or an undischarged bankrupt. You don’t even need to be a resident of the UK to form a limited company here. However, some company’s articles may specifically demand a higher minimum number of directors. If this is the case, the company must adhere to that greater minimum requirement.
The Requirements of Setting Up a Limited Company
In addition to naming at least one director and one member, all limited companies must supply a registered office address at the point of incorporation. This will become the official address of your new company, and it must be located in the same jurisdiction in which you are choosing to incorporate.
All correspondence that Companies House, HMRC, and other government agencies send to your company will be delivered to your registered office address. Therefore, it must be a real, physical address (not a PO Box number) where mail can be received.
The details of this address will be published on the Companies House website as a matter of public record, and all your statutory company records must be made available at this location for public inspection.
The simplest way to register a limited company is to use an authorised company formation agent, but you can apply independently as well.
Your application will require you to supply the following details:
- Company name
- Registered office address
- The nature of business activities/operations (you need to provide 1-4 SIC codes for this part)
- Details of directors, including service addresses
- Details of members, including service addresses
- Details of the company’s people with significant control
When you set up a company through an agent, approval from Companies House can take as little as 3 to 6 working hours, but it may take a little longer if you apply independently. You can begin trading through your new company from the moment that it is incorporated and you receive your certificate of incorporation.
Types of Limited Companies and Their Requirements
There are several types of companies that fall under the limited company banner:
- Private companies limited by shares (the most common structure)
- Private companies limited by guarantee (typically used by not-for-profits)
- Limited liability partnerships (for partnerships, such as accountants, dentists, etc.)
- Public limited companies (for companies that wish to trade on the stock exchange)
Each structure has slightly different Companies House (the UK’s registrar of companies) requirements when it comes to the necessary appointments.
Let’s take a closer look at each of these.
Private Companies Limited by Shares
To form a company limited by shares, you need a minimum of one person. This individual can fill all the necessary roles within the company, namely:
- Director: The person in charge of the general running of the business.
- Shareholder: The owner of the company.
- Person with Significant Control (PSC): The person who holds ultimate control of the company.
However, more than one person can be involved in the company if you wish. Different individuals can take on different roles, or more than one person can hold each role – it’s totally up to you. This flexibility allows you to structure your company in a way that best suits your business needs and objectives.
For example, if you’re a freelance consultant looking to incorporate, you might choose to be the sole director, shareholder, and PSC of your company. On the other hand, if you’re starting a small business with a partner, you might both become directors and shareholders, while one of you takes on the role of PSC.
Remember, the key advantage of a private company limited by shares is that it offers limited liability. This means that if the company runs into financial trouble, your personal assets are protected. The most you stand to lose is the value of your shares in the company.
Limited by Guarantee Companies
To form a limited by guarantee company, you also need a minimum of one person. This individual can fill all the necessary roles within the company, namely:
- Director: The person in charge of the general running of the business.
- Member (also known as a guarantor): This is the limited by guarantee version of a shareholder.
- Person with Significant Control (PSC): The person who holds ultimate control of the company.
Much like the limited by shares structure, these roles can be taken on by one person or shared amongst multiple people. This structure is typically used by not-for-profit organisations, clubs, and charities, where the members’ liability is limited to the amount they agree to contribute to the company’s assets if it is wound up.
For example, if you’re setting up a local sports club as a limited by guarantee company, you might choose to be the sole director, member, and PSC. Alternatively, if you’re forming a charity with a group of trustees, each trustee might become a member and one or two might take on the role of director, with one serving as the PSC.
Limited Liability Partnerships (LLP)
To form a limited liability partnership, you need a minimum of two people. These will both need to be designated members. You will also need a PSC – who can be one of the designated members or someone else.
You can also appoint non-designated members in the LLP, provided two designated members are in place. Designated members have extra legal responsibilities when compared to non-designated members, such as filing the LLP accounts.
For example, if you’re a group of architects looking to form an LLP, you might all become members, with two of you taking on the role of designated members and one serving as the PSC.
Public Limited Companies (PLC)
To form a public limited company, you need a minimum of two directors and a qualified company secretary (this person must have the necessary knowledge and ability). You will also need at least one shareholder, who can be one of the directors or someone else.
For example, if you’re starting a larger business that you plan to list on the stock exchange, you might have a board of directors, a larger group of shareholders, and one or two PSCs.
Forming a limited company in the UK is a flexible process, so whether you’re a solo entrepreneur or part of a larger team, there’s a company structure that’s right for you.
Remember, the number of people needed to form a limited company depends on the type of company you’re forming. While you can form a private company (either limited by shares or guarantee) with just one person, LLPs and PLCs require at least two people.
Introducing 1st Formations Ltd.
1st Formations is the UK’s leading company formation agent.
Founded in 2014, they have formed over 1 million companies and assisted many thousands of clients to grow their business with expert advice on limited companies, reporting requirements, and corporate governance.
They can help you with registering a new company, registered office services, full Company Secretary services, and much more.
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