Online company formation: every important application choice explained

1. Choose the legal company and the right application route

Most commercial formation offers on this site target a private company limited by shares. Its owners hold shares; the company is legally separate from them. A company limited by guarantee instead has guarantors and a guarantee amount rather than share capital and is commonly used for membership or non-profit purposes. A CIC has a community-interest framework and additional requirements. An LLP and a public limited company are different structures, not alternative labels for the same online Ltd application.

Do not select a standard limited-by-shares flow solely because it is cheapest if your organisation needs guarantee membership, a CIC or bespoke ownership. Providers and government services differ in what they support. Check the official incorporation route and any extra requirements before starting; registration as a company does not itself establish charitable status or permission for regulated activity.

2. Decide the registration jurisdiction before choosing an address

Companies House registers companies in England and Wales, Wales, Scotland or Northern Ireland. The registered office must be in the relevant jurisdiction. For example, a Scottish company cannot use a London address as its registered office merely because that address comes free in a formation package.

Choose this deliberately: moving the office within the appropriate jurisdiction is different from moving the company between jurisdictions. Do not assume changing a postcode later changes where the company is legally registered. If your intended address and application jurisdiction conflict, resolve that before paying for a service.

3. Name, registered office, service address, residential address and email

The legal company name must comply with naming rules and usually end in Limited or Ltd, subject to applicable exceptions. A provider’s live availability check does not replace trade mark research or any consent needed for sensitive wording. Decide whether a trading brand will differ from the registered name and keep legal disclosures clear.

Choose an appropriate physical registered office where official mail reliably reaches someone acting for the company and delivery can be acknowledged. Directors also give a public service address and their usual residential address in the designated private field. Do not automatically copy a home address into every box: the public registered-office and service-address fields have different privacy consequences.

The registered email is used for Companies House communications and is not published on the public register. Use a monitored address that will survive a founder leaving or changing a personal inbox. An optional virtual-office package does not necessarily include director addresses or all commercial mail; confirm scope, permission, renewal and forwarding charges.

4. Appoint directors, identify shareholders and report control separately

A private company needs at least one eligible natural-person director and at least one shareholder for a company limited by shares. The same person can do both jobs. A director manages the company; a shareholder owns rights attached to shares; a PSC is identified through statutory control tests. These are not interchangeable lists.

Enter each person’s accurate details and complete required Companies House identity verification and role-linking. A personal identity code belongs to an individual, not the company. A director who is also a PSC must consider both roles. Read the role-specific PSC deadline guidance rather than assuming incorporation completes every verification obligation.

An agent may limit how many directors or shareholders its standard flow supports, even where company law permits a different arrangement. Check corporate shareholders, overseas applicants and multiple-owner eligibility explicitly. “Multi-director” on a landing page is not proof that multiple shareholders or bespoke share classes are accepted.

5. Choose share quantities, nominal value, currency and rights

The statement of capital records the shares issued on incorporation, including number, class, nominal value and prescribed rights. Nominal value is not company valuation. One £1 share does not mean the business is worth £1; 100 £1 shares are £100 of nominal capital and also provide a convenient way to describe percentages.

Illustrative single-founder choice: one ordinary £1 share or 100 ordinary £1 shares can both represent 100% ownership, but involve different nominal capital. Illustrative two-founder choice: 60 and 40 shares with identical rights represent 60/40 ownership. Consider voting and dividend rights, amounts paid or unpaid, funding plans and PSC reporting rather than choosing a number at random.

Standard equal-right ordinary shares can fit simple ownership. Different dividend rights, investor preferences, employee equity or non-voting shares need careful drafting and tax consideration. Do not invent a new class name while leaving its rights unexplained. Ask a solicitor or accountant whether a standard package can implement the intended arrangement before submitting.

6. Model articles, tailored articles and the memorandum

The articles are the company’s constitutional rules. Model articles are a standard starting point, not a negotiated solution to every founder dispute. Check whether the selected online route supports model articles only or permits other articles. The subscribers also agree to form the company through the memorandum; a standard online route may generate it from the application.

Tailored articles may be appropriate for special share rights, investor requirements or governance. A shareholders’ agreement is separate and should be consistent with the articles. A formation agent can sometimes supply alternative documents, but receiving a template is not equivalent to individual legal advice.

For equal co-founders, agree deadlock and departure arrangements before incorporation if they are material to the business. Do not assume selecting “standard articles” creates a fair exit mechanism or assigns pre-existing intellectual property to the company.

7. Select SIC codes and distinguish tax registration from formation

Use the Companies House condensed SIC list and select up to four relevant activity codes. Describe actual or intended activities accurately. A code is not permission to conduct regulated work and does not automatically determine a VAT scheme or tax rate.

The company’s first accounting reference date normally falls on the last day of the anniversary month. The actual start of business activity determines important Corporation Tax obligations. Direct online incorporation commonly sets up Corporation Tax as part of the process unless the company is dormant; confirm the route used, HMRC correspondence and whether additional registration is needed.

VAT and PAYE are separate systems with their own triggers. An agent offering “VAT registration” or “PAYE registration” does not mean every new company needs either, and registration does not mean future returns or payroll are handled. Record exactly what the provider will do and when.

8. Which checkout extras are optional—and when might they help?

A private company does not generally have to appoint a company secretary. A paid “Company Secretary” subscription is a commercial administration service; check whether it includes an actual appointment, specific filings or only assistance. It does not transfer the directors’ legal responsibilities.

An address product can help with public-address privacy and mail continuity if it meets the jurisdiction and appropriate-address rules. Printed certificates, bound documents and premium packs may be convenient but are not universally necessary to create the company. Software and accountancy subscriptions should be assessed on their actual deliverables.

Banking can be bundled or arranged separately. In subsidised formation offers, account opening can be a contractual condition of the advertised price. Check transaction fees and the deadline for meeting that condition. Keep a conditional referral reward separate from the guaranteed formation cost.

9. Review the legal decisions before you pay

Read the full preview: name, jurisdiction, every public and private address field, director details, shareholders, capital and PSC conditions. Compare the ownership percentages with your agreed plan. Check the identity-verification steps and any post-incorporation role-linking dates.

Record the checkout total including VAT, which filing fee is included and any recurring charges. Preserve the terms and application confirmation. If an application is rejected, find out what the provider corrects or refunds; do not assume a promised processing speed guarantees acceptance.

After incorporation, check the public register and delivered documents. Save company credentials securely, establish bookkeeping and create a filing plan. A successful application is the start of company administration, not the end of the directors’ obligations.

Identity Verification for Directors and PSCs: A Procedural Guide

Following the full implementation of the Economic Crime and Corporate Transparency Act, a significant new compliance step has been introduced. Since 18 November 2025, all newly appointed company directors and Persons with Significant Control (PSCs) must have their identity verified. This measure is designed to enhance the integrity of the company register, making it harder to register fictitious individuals or conceal beneficial ownership for illicit purposes. The requirement, which will eventually be extended to all existing directors and PSCs, is a fundamental shift in UK company law, moving from a system of good-faith reporting to one of verified identity. Founders must now factor this mandatory procedure into their company formation timeline.

There are two approved pathways to complete this verification. The first is a direct digital process with Companies House. This involves the individual using a smartphone or computer to scan an approved photo ID (like a passport or driving licence) and perform a biometric check, such as a facial scan. The second route is through an authorised intermediary, known as an Authorised Corporate Service Provider (ACSP). These are typically company formation agents, accountants, or legal professionals who are approved by Companies House to conduct identity checks on behalf of their clients. This option integrates the verification into the guided formation service, which can be beneficial for individuals who are less comfortable with digital-only processes or who require additional support.

1. 1

   When appointing a new director or PSC during or after formation, you must first choose a verification route: direct digital verification or via an ACSP.

2. 2

   If using the direct route, the individual to be verified will receive an instruction to begin the Companies House digital identity verification process.

3. 3

   The individual must have an approved form of photographic identification, such as a valid passport or a UK photocard driving licence.

4. 4

   Using a device with a camera, they will be guided to scan their identity document and capture a biometric likeness of their face.

5. 5

   Once the system successfully matches the document to the person, their identity is confirmed and electronically linked to their record as a director or PSC at Companies House.

6. 6

   If using an ACSP, you will follow their specific instructions, which typically involve providing certified documents or using a third-party identity-checking app integrated with their service.

Worth knowing: Mandatory identity verification is a critical new step, so choose a route based on your directors' need for support, technical confidence, and desire for an integrated service.

Paying Yourself: A Founder's Guide to Salary vs. Dividends

As a director and shareholder, you have two primary ways to draw money from your new company: a salary and dividends. A salary is an operating expense for the business, which means it reduces the company's profit and therefore its Corporation Tax liability. However, the salary itself is subject to Income Tax and National Insurance Contributions (NICs) for the employee, and also Employer's NICs for the company. For the 2026/27 tax year, Employer's NICs are charged at 15% on annual earnings above £5,000 per employee, although this may be offset by the Employment Allowance.

Dividends, in contrast, are paid out of post-tax profits. The company must first calculate its profit and pay Corporation Tax (at 19% on profits up to £50,000) before any dividends can be distributed to shareholders. When you receive a dividend, you are entitled to a tax-free Dividend Allowance of £500 for the 2026/27 tax year. Any dividend income above this allowance is taxed at rates that depend on your personal Income Tax band. For many small, profitable companies, taking most of the income as dividends can be more tax-efficient than taking a large salary, as it avoids National Insurance completely.

A common and effective strategy for founder-directors is to draw a small salary and take the remaining profits as dividends. The salary is often set high enough to qualify for state benefits (like the State Pension) but low enough to minimise or eliminate any Income Tax and NICs liability. The Employment Allowance, at £10,500 for 2026/27, can cover the company's entire Employer's NICs bill in many small businesses, making a salary up to that level potentially more tax-efficient. This 'low salary, high dividend' model usually results in the highest take-home pay, but it requires careful planning with an accountant to ensure it is structured correctly and remains compliant.

Worth knowing: This illustrative chart, assuming a basic rate taxpayer extracting £40k profit using an optimal low salary, shows that a mixed remuneration strategy typically yields the highest net pay.

Data Protection Duties for New Companies: Beyond the ICO Fee

Nearly every new limited company will handle personal data, which includes information about customers, suppliers, website visitors, and employees. The UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018 mandate that you handle this information responsibly. A primary legal obligation for most companies is to register with the Information Commissioner's Office (ICO) and pay an annual data protection fee. This is not optional; failing to pay can result in a fine. However, payment is merely the first step. True compliance involves understanding and embedding data protection principles into your business practices from day one, treating personal data with the same care as company finances.

Your core duty is to be transparent about how you collect, use, and store personal data. This means you must have a 'lawful basis' for your data processing activities, such as obtaining clear consent or needing the data to fulfil a contract. A vital and practical step is to create a privacy notice (or privacy policy) and make it easily accessible, for example, on your website's footer. This document must inform individuals about who you are, what data you are collecting, why you are collecting it, how long you will keep it, and who you might share it with. You must also have appropriate security measures in place to protect data from being lost, stolen, or accidentally disclosed.

• Identify and document the types of personal data you process (e.g., customer names, employee bank details, marketing email lists).
• Determine and record your lawful basis for each processing activity under UK GDPR, such as consent, contract, or legitimate interests.
• Draft and publish a clear, comprehensive privacy notice on your company website and provide it whenever you collect personal data.
• Implement a process for handling data subject rights, including requests from individuals to access, correct, or delete their data.
• Ensure you have adequate technical and organisational security, like using strong passwords, encryption, and secure storage.
• Pay the correct annual data protection fee to the ICO on time by completing their self-assessment.

Worth knowing: Paying the correct ICO fee is a legal necessity for most companies, but ongoing compliance requires embedding fair, transparent, and secure data handling into all operations.

Common Mistakes in Share Allotment and Capital Structure

The share capital structure you choose during formation is not just a box-ticking exercise; it has lasting implications for raising investment, remunerating owners, and managing control. A frequent and significant mistake is to create a structure that is too simple or rigid. For instance, many founders incorporate a company with just one single share issued for £1. While legally valid, this makes it incredibly difficult to bring in a co-founder or an investor at a later date. To sell, say, 20% of the company, you would need to undertake a complex share subdivision or reorganisation. A far more practical approach is to issue a larger number of shares, such as 100 or 1,000, for a lower nominal value each.

Another common error is to set the nominal value of each share too high. The nominal (or 'par') value is an arbitrary legal price, not the share's actual market worth. Setting a nominal value of £100 per share means the company can never issue new shares for less than £100, creating a major obstacle if it needs to raise capital at a different valuation. It is standard practice to use a very low nominal value, such as £1, £0.01, or even £0.001. This allows shares to be issued at any price above that low threshold (the excess being 'share premium'), providing maximum flexibility. Finally, remember that any new shares allotted after incorporation must be reported to Companies House using form SH01 within one month, a step that is often forgotten.

• Issuing only one share, which offers zero flexibility for bringing in new shareholders or creating employee share schemes.
• Choosing a high nominal value per share (e.g., £100), which can prevent future share issues at a lower price.
• Incorrectly allocating all shares to one founder in a multi-founder team, leading to ownership disputes and difficulties in correction.
• Failing to file form SH01 with Companies House within one month of allotting new shares post-incorporation.
• Neglecting to update the company's own statutory register of members after a share transfer or new allotment, a separate legal requirement.
• Confusing share capital (the nominal value) with the actual funds invested in the business, which can include loans or share premium.

Worth knowing: Always opt for a higher number of shares with a very low nominal value each to ensure your company has the structural flexibility for future growth and investment.

Planning Your Exit: Capital Gains Tax and Business Asset Disposal Relief

While launching your business is the immediate focus, smart founders consider their eventual exit strategy from day one. The decisions made about share ownership during formation can have a huge impact on the tax paid when you eventually sell your shares. When you dispose of shares for a profit, this 'gain' is typically liable for Capital Gains Tax (CGT). For the 2026/27 tax year, the CGT rates on shares are 18% for basic rate taxpayers and 24% for higher rate taxpayers, applied to gains exceeding the annual exemption. However, a highly valuable tax relief, Business Asset Disposal Relief (BADR), can dramatically reduce this tax bill for qualifying individuals.

BADR, formerly known as Entrepreneurs' Relief, allows shareholders to pay a reduced CGT rate on gains made from selling their business shares. As of 6 April 2026, the BADR rate is 18%, and it can be applied to a lifetime limit of £1 million in qualifying gains. For a higher rate taxpayer, this provides a significant saving compared to the standard 24% rate. To benefit from BADR, a number of conditions must be met, crucially for at least 24 months leading up to the sale. These include the company being a trading entity, and the individual being an employee or officer who holds at least 5% of both the ordinary share capital and the voting rights. This makes initial share allocation critical.

• The company must primarily be a 'trading company' (as opposed to one dealing in investments or property).
• The individual selling the shares must be an employee or officer of the company (e.g., a director).
• The individual must own at least 5% of the company's Ordinary Share Capital.
• This 5% shareholding must also provide the individual with at least 5% of the voting rights.
• All of these conditions must be met for a continuous period of 24 months ending on the date of the share disposal.

Worth knowing: Ensuring all key founders hold at least a 5% stake from incorporation is crucial for unlocking Business Asset Disposal Relief and its substantial tax savings on a future sale.

The Confirmation Statement: Preparing for Your First Annual Filing

Approximately one year after your company's incorporation, you will be required to complete your first major ongoing compliance task: filing a confirmation statement (form CS01). This is a separate legal requirement from filing your annual accounts and Corporation Tax return. The purpose of the confirmation statement is to verify that the information held by Companies House about your company is correct and up-to-date at a specific point in time. It acts as an annual check-up on your company's registered details, including its officers, registered office, and details of its shareholders and their holdings. This filing must be made at least once every 12 months.

The deadline for filing is strict: you have just 14 days from the end of your 12-month 'review period' to submit the statement. Failure to file on time is a criminal offence and can lead to fines for directors and, ultimately, the company being struck off the register. The statutory filing fee for a digital submission in 2026 is £50, which covers all confirmation statements you might need to file within a single year. Before submitting, it is essential to meticulously review all the company's data on the public register. If any information has changed during the year—for example, a director has a new residential address or shares have been transferred—you must report these changes before or alongside the confirmation statement.

1. 1

   First, identify your company's 'review period', which ends on the anniversary of incorporation or your last statement date.

2. 2

   Before this period ends, log in to the Companies House online service or instruct your formation agent to begin the process.

3. 3

   Carefully check the accuracy of the registered office address, director and secretary details, PSC register, SIC code, and statement of capital.

4. 4

   If any details are incorrect, file the appropriate change of circumstance forms (e.g., CH01 for a director's address change) immediately.

5. 5

   Once all information is correct, complete the confirmation statement (CS01), declaring that the public record is up-to-date.

6. 6

   Submit the confirmation statement and pay the £50 online fee within 14 days of your review period's end date to remain compliant.

Worth knowing: Diarise your confirmation statement deadline meticulously and use it as an annual prompt to ensure all your company's statutory information on public record is correct.

Budgeting for Your First Year: A Breakdown of Mandatory Costs

While the excitement of a new venture focuses on products and customers, it is vital for founders to budget for the mandatory administrative costs required to keep the company legally compliant. These are not operational expenses like marketing or salaries, but fundamental fees payable to government bodies simply to maintain the company's legal standing. Overlooking them can lead to penalties and unnecessary stress. The key entities you will need to pay in your first year are Companies House for corporate registration and the Information Commissioner's Office (ICO) for data protection.

The first cost is the company incorporation fee itself, which in October 2026 is £100 for a standard online application filed directly with Companies House. Soon after you begin trading and handling any personal data (even just a customer email address), you will almost certainly need to register with the ICO and pay the annual data protection fee; for most new businesses with low turnover and few staff, this is the Tier 1 fee of £52. Finally, as you approach your first anniversary, you must file a confirmation statement, which has a £50 filing fee. These core, unavoidable government costs amount to £202 in the first year of business.

Worth knowing: A new UK limited company faces a minimum of £202 in non-optional government fees within its first year, so ensure this is factored into your initial startup budget.

Common questions

Official sources & further reading

This guide draws on the official guidance below. Rules, fees and individual circumstances can change; check the relevant source before acting.

• GOV.UK: Set up a private limited company
• GOV.UK: Shareholders and share capital
• GOV.UK: Memorandum and articles
• GOV.UK: Addresses and registered email
• Companies House: Identity verification
• Companies House: Condensed SIC list

General UK information, primarily for private companies limited by shares. This is not personalised legal, tax or financial advice. An accountant or solicitor can help apply the rules to your situation.