Before you incorporate: three decisions that matter
1. Is a limited company actually right? For most startups with ambition — outside investment, co-founders, meaningful profit, or risk you'd rather not carry personally — yes. A company is a separate legal person: it carries the contracts, the debts and the tax bill. But if you're testing an idea solo with modest income, starting as a sole trader and incorporating later is cheaper and simpler. (Our sister site Sole Trader Accountants covers that route.)
2. Who owns what — really? Equity splits are the number-one founder fallout. Decide before Companies House sees anything: contributions, vesting expectations, and what happens if someone leaves in year one. A 50/50 split with no leaver provisions is a time bomb with a friendly face.
3. What will the company be called? Check the Companies House register, the trade mark register, and whether a sensible domain exists. Avoid “sensitive words” (like Bank, Institute, Royal) that need permission.
Those three decided, the mechanical part is quick — but the order matters. The full guide walks through all eight steps, the share-structure patterns that survive funding rounds, and your complete year-one compliance calendar.
What this guide covers
- The 8-step incorporation sequence, in the right order
- Share structures that won't haunt your first funding round
- Every registration and deadline for year one
- The day-one finance stack that costs £0 extra
The 8-step incorporation sequence
- Choose your structure basics. Standard private company limited by shares (LTD). One share class — ordinary £0.01 or £1 shares — is right for almost every new startup. Resist exotic share classes until you have a reason (investors will bring their own).
- Issue a sensible number of shares. Incorporate with, say, 100 or 1,000 shares — not 1. One share means you can't sell 10% without splitting first. More shares cost nothing and keep future options open.
- Appoint directors and a registered office. You need at least one director (16+). Your registered office must be a real UK address that receives post — many founders use their accountant's address to keep home addresses off the public record. Since 2024 you also need a registered email address and a statement that the company's purpose is lawful.
- Identify your PSCs. Anyone holding over 25% of shares or voting rights is a Person with Significant Control and goes on the public register. From 2026, identity verification for directors and PSCs is mandatory — factor in a few days.
- Incorporate. Directly at Companies House (£50, usually same-day) or through your accountant, who'll also handle the registrations below and set the share structure up correctly. Use SIC codes that genuinely describe your activity.
- Register for corporation tax. Within 3 months of starting to trade. HMRC usually sends your UTR automatically after incorporation — the registration itself is still your job.
- Decide on VAT — don't just default. Registration is mandatory once taxable turnover passes £90,000 in any rolling 12 months, but registering voluntarily earlier can pay if your customers are VAT-registered businesses (you reclaim input VAT and lose nothing on price). If you sell to consumers, early registration makes you 20% more expensive — time it carefully. See our VAT for startups guide.
- Set up PAYE — when you're ready to pay anyone. Including yourself as a salaried director. Register before the first payday, not after.
The day-one finance stack (costs £0 extra)
Open a proper business account immediately — mixing personal and company money is the classic first-year mess, and it's legally the company's money, not yours. Our recommended stack:
- Mettle, by NatWest — free business account for companies with up to two owners, FSCS-protected. Details here.
- FreeAgent — included free with every one of our packages (worth up to £330/year) and also free with a Mettle account. Bank feed in, receipts snapped on your phone, corporation tax forecast live all year.
- A named accountant — from £49 + VAT/month on our startup bands.
Founder mistake #1 Paying company money to yourself “as needed” and sorting it later. That's a director's loan account building towards an unexpected tax charge (S455: 33.75% on loans still outstanding 9 months after year-end). Set a salary/dividend plan in month one — our
pay-yourself guide shows the standard pattern.
Your year-one compliance calendar
- Confirmation statement — at least annually (£34 online). Confirms your public record is current.
- Statutory accounts — due at Companies House 9 months after your accounting year-end (21 months after incorporation for your first set).
- Corporation tax — payment due 9 months + 1 day after year-end; the CT600 return due 12 months after. Yes, the payment is due before the return.
- VAT returns — quarterly, digitally via MTD-compatible software, once registered.
- PAYE — Real Time Information submissions every payday; pensions auto-enrolment duties from your first hire.
- Directors' self assessment — needed in most cases where you take dividends; 31 January deadline.
Corporation tax is currently 19% on profits up to £50,000 and 25% above £250,000, with marginal relief between. Profits left in the company are taxed at those rates; what you extract is taxed again personally — which is why the extraction plan matters as much as the profit.
What tripping over looks like (so you can step over it)
- Incorporating with 1 share, then needing a share split before a co-founder joins.
- Missing the corporation tax registration window because “HMRC will write to us”.
- Registering for VAT late — HMRC backdates your liability to when you crossed the threshold, and you eat the VAT you never charged.
- Using a personal account “just for the first few months”.
- Doing all of the above at 11pm instead of building the product.
Or skip the checklist entirely: we incorporate startups properly, register everything, set up FreeAgent and Mettle, and hand you back your evenings — from £49 + VAT a month.
