How much does it cost to form a limited company?

It may surprise you to learn that you can form a limited company—directly via Companies House—for a mere £50.

However, you may prefer to pay an intermediary to do this on your behalf, increasing the cost.

In this guide, we examine the most popular options and the costs of each route. We also consider the ongoing costs of running a limited company compared to the sole trader route.

What are your options?

There are three main ways to form a new company. In each case, the company is registered at Companies House. It is the method of transmission that varies.

1. Direct with Companies House
2. Use a company formation agent
3. Use an accountant

Before you decide which route to take, read our set up a company guide to find out what is involved when you form a company, and what information you will need during the application process.

Form a company direct via Companies House

Unsurprisingly, the most direct route is to incorporate your new company directly with the registrar, Companies House.

You can do this online or submit paper forms (for an additional cost).

You can start the online application here if you have all of the details you’ll need to incorporate to hand (personal information about the shareholders and office holders, plus proof of ID).

To apply online costs £50.

If you prefer to register by post, you must fill in the physical version of application form IN01.

Applying by post costs £71 and may take 8-10 days.

Use a formation agent

If you would rather use a third party to help you with the application, numerous formation agents will walk you through the process (for a fee, of course).

They can help spot and amend any mistakes or omissions you make during the application process.

You may prefer this option if you haven’t dealt with Companies House before or simply for peace of mind.

The costs vary, of course. Depending on the package you choose, you can pay anything from a few pounds to several hundred.

Many formation agents provide add-ons, such as a registered office address, virtual office space, accountancy packages, business bank accounts, etc.

This enables intermediaries to keep the price of formation very low.

Our formations partner, 1st Formations offers a variety of company formations packages – from just £52.99.

Hire an accountant to do the hard work

Almost all limited company businesses hire an accountant to handle the everyday accounting and tax tasks associated with running a company.

If you hire an accountant before incorporating, it makes sense for them to handle the incorporation process too.

If your formation needs are complex, seeking professional help (from an accountant) makes sense. For example, this could be the case if you want to create multiple share classes.

Again, the costs vary greatly. Some accountants provide onboarding services for free if you become a client. Others charge a fixed one-off fee of £100.

All the accountants in our directory will set up a company for you = usually for free, if you sign up as a new client.

Other things to bear in mind

If you apply online at Companies House, your company will be automatically registered for Corporation Tax at the same time.

You need to apply separately if you don’t use the Company’s House service. This must be within 3 months of starting the business.

You must also register your company as an employer (for payroll purposes) and VAT if required. Again, if you incorporate directly with Companies House, you can register as an employer simultaneously.

If you hire an accountant (see above), they will handle all of these start-up tasks.

As you can see, the cost of formation is relatively trivial, and price is often a secondary consideration for new business owners. The main thing is to choose an incorporation method you feel comfortable with.

Go direct if you’re feeling confident and know what you’re doing. If you’d prefer more guidance and help – use a formations agent, or hire an accountant.

What about the ongoing costs of running a company?

There are many differences between setting up a business as a sole trader vs. a limited company.

The initial costs are minimal; however, there are some ongoing costs associated with each type of trading structure.

We’ve listed some of the extra costs you might incur as a limited company owner compared to the self employed route.

• All companies submit an annual confirmation statement to Companies House – which costs £34 if you apply online.
• Most companies hire an accountant – costs vary – and are usually higher for limited companies than sole traders.
• Directors and employees are paid via PAYE, so there may be some extra payroll-related costs.
• Accounting software tends to be more expensive for limited companies vs. sole traders, although the difference is marginal.
• A limited company must have a separate bank account – which might have a monthly fee.

In many cases, the ongoing costs of running a company are similar to those of being a sole trader.

From our experience at Bytestart, the main difference is the cost of accounting. Limited company accounts are more complicated, so accountants charge more.

Form a company today for just £52.99

If you want to form a company right away (from £52.99), visit 1st Formations, our incorporation partner.