How to set up limited company in UK for your Internet business

The UK is the most popular location for inward investment in Europe, attracting almost one in five of all investment projects in Europe since 2004.

The World Bank Report 'Doing Business 2011' ranks the UK the easiest place to set up and run a business in the EU and G8. UK Trade & Investment reports this year that whilst the USA remains the biggest source of inward investment projects, foreign direct investment comes from 54 countries in total.

The UK's digital economy is also growing at a rate of around 11% a year, contributing £121 billion to the overall economy in 2012. That's 8.3% GDP. This figure is forecast to rise to £225 billion by 2016, according to research from the Boston Consulting Group.

How easy then is it to set up a digital company in the UK?

What is a limited company?

A limited company is an organisation that you can set up to run your business. It is responsible in its own right for everything it does and its finances are separate to your personal finances.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.


Every limited company has ‘members’ - people or organisations who own shares in the company. Company directors are responsible for running the company. Directors often own shares, but they don’t have to.

Legal responsibilities

There are many legal responsibilities involved with being a director and running a limited company.

Directors' responsibilities

As a director of a limited company, the law says you must:

  • try to make the company a success, using your skills, experience and judgment
  • make decisions for the benefit of the company, not yourself
  • tell other shareholders if you might personally benefit from a transaction the company makes
  • keep company records and report changes to Companies House and HM Revenue & Customs
  • make sure the company’s accounts are a ‘true and fair view’ of the business’ finances

Day-to-day management

You can ask other people to manage some of these things day-to-day. For example, an accountant can manage your accounts for you - but you are still legally responsible for them.


Most limited companies are ‘limited by shares’.

This means that the shareholders’ responsibilities for the company’s financial liabilities are limited to the value of shares that they own but have not paid for.

For example, a company limited by shares issues 100 shares valued at £1 each when it’s set up. Its 2 shareholders own 50 shares each and have both paid in full for 25 of these.

If the company goes bust, the maximum the shareholders have to pay towards its outstanding bills is £50 - the value of the remaining 25 shares that they’ve each not paid for.

Company directors aren’t personally responsible for debts the business can’t pay if it goes wrong, as long as they haven’t broken the law.

Other types of company

Most companies are private companies limited by shares. There are 3 other types.

1. Private company limited by guarantee

Directors or shareholders financially back the organisation up to a specific amount if things go wrong.

2. Private unlimited company

Directors or shareholders are liable for all debts if things go wrong.

3. Public limited company

Companies where shares are traded publicly on a market, like the London Stock Exchange.

How to set up limited company in UK

You must set up the company with Companies House and let HM Revenue & Customs (HMRC) know when the company starts its business activities.

Every financial year, the company must:

The company must register for VAT if you expect its takings to be more than £79,000 a year.

If you’re a director of a limited company, you must:

E RADAR Services

e radar iconWe can help you set up your digital limited company, fully formed and registered in England and Wales. All our companies are formed electronically, so there are no paper forms for you to fill in. We simply take some details from you and get on with the process.

Timing depends on processing by Companies House, and they have a target of three working days. However, our experience is that in most cases, electronic incorporation is much quicker. So with us, you get an express service without paying an express service price.

We will even support you in choosing your company name. As soon as your company is formed, we will let you know, so that if you need to, you can start trading straight away. And unlike most company formation agencies, we will make sure that all the proper paperwork is done for you, your registers are properly written up, and share certificates are issued.

Contact us

Email us using the online form or telephone us on +44 (0)7428 253510 to find out more