Types of Incorporation in the UK
When incorporating a business in the UK, one of the first decisions you’ll make is choosing the right type of company structure. The structure you select affects your legal responsibilities, reporting requirements, and even your funding options.
While the majority of UK startups opt for a Private Company Limited by Shares (Ltd), there are several other incorporation types available—each suited to different business models and goals.
Below is a breakdown of the main incorporated entity types in the UK:
1. Private Company Limited by Shares (Ltd)
Most common choice for UK startups and small businesses
A Private Company Limited by Shares is a company where:
- Ownership is divided into shares
- The liability of shareholders is limited to the amount unpaid on their shares
- Shares are not publicly traded on the stock exchange
Key features:
- Can be owned and run by a single person (you can be both the sole director and shareholder)
- Profits can be distributed via dividends
- Ideal for businesses seeking limited liability, tax planning opportunities, and a professional image
Example: A tech consultant forms “Bright Byte Ltd” to take on contracts under a formal structure and keep personal assets protected. GOV.UK: Private company limited by shares
2. Private Company Limited by Guarantee (CLG)
Commonly used for non-profits, charities, and clubs
A Company Limited by Guarantee does not have shareholders. Instead, it has guarantors who agree to pay a fixed amount (often £1) if the company is wound up.
Key features:
- No share capital or shareholders
- Profits are reinvested rather than distributed
- Used by charities, community interest groups, membership organisations, etc.
Example: A community arts organisation forms “Creative Hubs Manchester” as a CLG to run workshops and apply for public grants.
Set up a limited by guarantee company
3. Public Limited Company (PLC)
Suitable for large businesses planning to raise capital publicly
A Public Limited Company (PLC):
- Can offer its shares to the public via a stock exchange
- Must have a minimum share capital of £50,000, with at least 25% paid up
- Must have at least two directors and a qualified company secretary
Key features:
- Subject to stricter regulations and transparency requirements
- Typically used by businesses seeking major investment or planning to scale rapidly
Example: A growing manufacturing firm becomes “EcoMaterials PLC” to list shares on the London Stock Exchange and raise funds from institutional investors.
4. Limited Liability Partnership (LLP)
Ideal for professional services firms
An LLP combines the flexibility of a traditional partnership with the limited liability benefits of a company. It’s commonly used by:
- Law firms
- Accountants
- Architects
- Consultants
Key features:
- Requires at least two designated members
- Each member’s liability is limited to their agreed contribution
- Profits are typically shared directly between partners (taxed as income)
Example: Two freelance accountants form “J&P Accountancy LLP” to present a united brand and limit their personal risk.
Set up an LLP – GOV.UK
Which Structure Is Right for You?
| Structure | Best For | Liability | Shareholders/Owners | Can Raise Public Capital? |
| Ltd | Startups & SMEs | Limited to shares | 1+ shareholders | No |
| CLG | Charities & Non-profits | Limited to guarantee amount | Guarantors | No |
| PLC | Larger, scalable firms | Limited to shares | 2+ shareholders | Yes |
| LLP | Professional services | Limited to contributions | 2+ members | No |
For most new businesses in the UK, a Private Limited Company (Ltd) is the preferred route due to its:
- Simplicity of setup
- Legal protection
- Tax efficiency
- Flexibility for growth
It’s a structure that suits everything from freelance services to tech startups and online retailers.
Need help choosing the right structure? Contact Formations Wise for expert guidance on incorporation options.
How Do You Incorporate a Company in the UK?
Incorporating a business in the UK is a straightforward process, especially with the help of a formation agent like Formations Wise. Here’s a step-by-step overview:
- Choose a Company Name
Your name must be unique, not offensive, and must end in “Limited” or “Ltd”. You can check name availability here: FormationsWise Name Check
- Select Your Registered Office Address
This will be your company’s official address. It must be a UK address and will appear on public record. Need a registered office address? find out more here.
- Appoint Directors and Shareholders
You’ll need at least one director. Shareholders can be individuals or other companies.
- Decide on Share Structure
Define how many shares the company will issue and who owns them.
- Prepare a Memorandum and Articles of Association
These are legal documents outlining the company’s rules and structure. Standard templates are often used for small businesses.
- Register with Companies House
You can register online through:
Registration usually takes a few hours to one working day.
What Happens After Incorporation?
Once your company is successfully incorporated with Companies House, the legal formation is complete – but your responsibilities as a company director are just beginning.
Here’s what you’ll receive upon incorporation and what you must do next to stay compliant and ready for business.
What You’ll Receive After Incorporation
Once your company is formed, you’ll get the following key documents and identifiers:
Certificate of Incorporation
This is your company’s official proof of existence. It confirms:
- The company’s full name
- Its incorporation date
- The company number
- Jurisdiction (e.g. England and Wales, Scotland, or Northern Ireland)
This document is often required when opening a business bank account or applying for finance.
Company Registration Number (CRN)
This is a unique 8-character identifier (e.g. 12345678 or SC123456) assigned by Companies House. You’ll use it for all official filings and communications with Companies House and HMRC.
Learn more about your CRN
Companies House Confirmation
Your company’s details—such as name, registered office, directors, and share structure—are published on the Companies House public register, which is accessible to anyone.
What You Need to Do Next
Incorporation is just the beginning. Here are the essential actions every newly registered business must take immediately after formation:
You must register your company for Corporation Tax within 3 months of starting to do business (e.g. trading, hiring, advertising, invoicing).
This can be done online using your company’s Government Gateway account:
Register for Corporation Tax
Failure to register on time may result in penalties.
2. Set Up a Business Bank Account
To separate your personal and business finances, you’ll need a business bank account in your company’s name. You’ll typically need:
- Your Certificate of Incorporation
- Your CRN
- Proof of ID and address for directors and shareholders
Most UK high street banks offer business accounts, and there are also popular online options like Tide, Starling Bank, and Monzo Business.
How to open a business bank account in the UK
3. Keep Statutory Records
By law, all UK limited companies must maintain statutory registers, including:
- Register of directors and shareholders
- Register of People with Significant Control (PSC)
- Minutes of meetings and resolutions
- All filings submitted to Companies House
These can be kept digitally or in physical form at your registered office or SAIL address (Single Alternative Inspection Location).
4. File Annual Accounts and a Confirmation Statement
Every year, you must file:
- Annual accounts – a snapshot of your financial performance and position
- Confirmation statement – an update of key company details (due every 12 months)
Even if you’re not trading, you must still file dormant accounts.
Other Post-Incorporation Tasks to Consider
Depending on your business model, you may also need to:
- Register for VAT (if turnover exceeds £90,000) – Register for VAT
- Register as an employer with HMRC if hiring staff – Register as an employer
- Set up payroll software or use a payroll provider
- Get business insurance (e.g. public liability, professional indemnity)
- Set up an accounting system (or appoint an accountant)
Is Incorporation Right for You?
Incorporating your business is a big step – but it’s not always the first step. For many UK entrepreneurs, it makes sense to start small and test the waters before committing to a formal company structure.
If you’re running a low-risk side hustle, operating solo, or just validating a business idea, working as a sole trader can offer a fast and simple setup. You’ll have fewer admin duties, and all income is treated as personal earnings.
That said, incorporation becomes increasingly attractive and often necessary as your business evolves.
When You Might Not Need to Incorporate (Yet)
You may not need to incorporate if:
- You’re just starting out and want to keep costs low
- You’re running a part-time freelance gig with minimal income
- You’re not dealing with clients or partners who require a company structure
- You don’t need to separate personal and business finances (yet)
In these cases, registering as a sole trader with HMRC is a simple option. You still need to report your income and file a Self-Assessment tax return.
Register as a sole trader with HMRC
When Incorporation Makes Sense
As your business grows, incorporation can offer valuable advantages. You should strongly consider incorporating if:
You Want Limited Liability Protection
If your business faces any form of financial or legal risk, incorporation helps shield your personal assets from company debts or claims. This is especially important if you’re:
- Taking on large contracts
- Hiring staff
- Leasing property
- Selling physical products
You’re Working With Bigger Clients
Larger clients—especially corporates, councils, or public sector organisations—often require suppliers to be limited companies for insurance, tax, and due diligence reasons.
You Plan to Raise Investment or Issue Shares
Incorporation is essential if you’re:
- Seeking outside investment (e.g., from angel investors or VCs)
- Bringing in co-founders or business partners
- Issuing equity in exchange for funding or expertise
Only incorporated companies can formally issue shares and structure ownership.
You Need a More Professional Image
Adding “Ltd” to your company name can boost credibility with:
- Customers
- Suppliers
- Banks and lenders
- Government grant schemes
It demonstrates commitment and often makes your business look more established and trustworthy.
You’re Planning for Long-Term Growth
If your long-term vision includes building a brand, scaling, or one day selling your business, incorporation provides a solid foundation. A limited company offers:
- Continuity – it exists independently of its founders
- Flexibility – to transfer ownership, expand, or take on new directors
- Structure – to manage income, taxation, and reinvestment more strategically
Final Thoughts on ‘What is Incorporation?’
So, what is incorporation? In short, it’s the process of turning your business idea into a legally recognised company. It provides protection, professionalism, and flexibility—and for many UK entrepreneurs, it’s a smart move early in their journey.
At Formations Wise, we make incorporation fast, simple, and fully compliant. Whether you’re ready to register your limited company or just exploring your options, we’re here to help every step of the way.
Start your incorporation with Formations Wise
