Thinking of setting up a limited company?
Understand what incorporation actually means for your tax, your liability and your ability to borrow — then form your company online in a few hours.
Form a Limited Company Sole trader or limited?
SME Loans has partnered with Rapid Formations, a Companies House authorised formation agent, to provide a quick online company formation service.Sole trader or limited company?
Both are legitimate ways to trade. The right answer depends on your profits, your risk and what you need from lenders and customers.
| Sole trader | Limited company | |
|---|---|---|
| Legal status | You and the business are the same | A separate legal entity |
| Liability | Personally liable for business debts | Liability normally limited to the company |
| Tax | Income tax and National Insurance on profits | Corporation Tax, then tax on salary and dividends |
| Admin | Self Assessment | Annual accounts, confirmation statement, Corporation Tax return |
| Borrowing | Assessed on you personally | Company can build its own credit profile |
| Privacy | Details stay private | Directors and filings appear on the public register |
Read our full comparison in sole trader vs limited company, or see the funding options for sole traders and limited companies.
Why businesses incorporate
Limited liability
Your personal assets are generally protected if the company runs into difficulty, provided you have not given personal guarantees.
Access to funding
Limited companies can build a company credit profile, and more lenders and products are open to them.
Tax planning
Profits are taxed through Corporation Tax, with the option to take a mix of salary and dividends.
Credibility
Some clients, suppliers and tenders will only deal with an incorporated business.
How to form a limited company
- Choose a company name. It must be unique on the Companies House register and avoid restricted words.
- Appoint directors and shareholders. You need at least one director; you can be the sole director and shareholder.
- Choose a registered office address. This appears on the public record, so many owners use a service address rather than their home.
- Prepare your memorandum and articles of association. Standard articles are normally generated for you.
- Register with Companies House and receive your certificate of incorporation.
- Register for Corporation Tax within three months of starting to trade, and consider VAT and PAYE.
You can file directly with Companies House yourself, or use an authorised formation agent who completes the filing, handles the paperwork and usually includes extras such as a registered office and a business bank account introduction.
What changes once you are a limited company
Corporation Tax
Due nine months and one day after your accounting period ends. If the bill is difficult to meet in one go, a Corporation Tax loan can spread it.
Annual filings
Accounts and a confirmation statement every year, with penalties for filing late.
Company bank account
Company money must be kept separate from personal money.
Funding
Most business lending is assessed on the company, though directors are often asked for a personal guarantee.
Forming your company
SME Loans has partnered with Rapid Formations, a Companies House authorised formation agent, to provide a quick online company formation service. Rapid Formations is an independent company and is not part of SME Loans.
You complete the formation with Rapid Formations directly, normally within a few hours, and come back to us when you need funding.
Common questions
How long does it take to form a company?
Online applications are typically approved by Companies House the same working day, often within a few hours.
How much does it cost?
Companies House charges a filing fee, and a formation agent adds a service fee. Current package prices are shown on the Rapid Formations website.
Can I move from sole trader to limited company?
Yes. You incorporate the new company, move your trade across and tell HMRC. Speak to your accountant about timing and any assets you transfer.
Can I borrow as a brand new company?
Sometimes. Options are narrower with no trading history, but startup business loans exist and we can talk through what is realistic.
Ready to form a limited company?
We've partnered with Rapid Formations, a Companies House authorised formation agent, to provide a quick online company formation service.