How to set up a limited company: step by step

A limited company is one of the most popular company types for founders and small partnerships. Partners' liability being generally limited to the capital they commit, and its management flexibility, make it attractive. In this guide we cover the set-up process step by step, required documents, timing and what to do after incorporation. Because regulation and fees change over time, confirm exact conditions with the competent authorities and an accountant.

What is a limited company?

A limited company is a type of trading company formed by one or more partners, with capital divided into shares and partners' liability essentially limited to the capital they committed. Unlike a sole proprietorship, the company has its own legal personality. For a comparison with the joint-stock company, see our company type guide.

Decisions before set-up

1. Partners and share ratios: Who contributes how much capital and owns what percentage.
2. Trade name: Check whether an identical or confusable name is already registered.
3. Business activity: Write a broad but realistic scope in the articles.
4. Capital: Check the current minimum in regulation.
5. Address: The company's legal address (lease, owned premises or, if available, virtual-office options and their regulatory fit).
6. Managers and signing authority: Who will run the company and be authorised to sign?

To clarify the partnership structure, read our founders' agreement guide.

Step-by-step incorporation

1. Prepare the articles of association

The articles are the company's constitution. They should cover partners and shares, capital, management and representation, decision procedures, profit distribution, share transfer and exit rules. You can use a template, but having a lawyer review it for your specifics is recommended.

2. Capital commitment and payment

A part of the capital is paid at incorporation and the rest within a set period; rules depend on regulation.

3. Prepare documents

Usually required:

• Partners' ID and residence details
• Signature declaration
• Articles of association
• Address proof or lease
• Name availability check
• Power of attorney where needed

Get the current list from the institution you apply to.

4. Registration application

The application is made to the relevant trade registry; electronic options, if available, speed things up. Fees and costs are paid per the current tariff.

5. Registration and announcement

Upon registration the company gains legal personality and the required announcements are made.

6. Tax registration and other openings

Tax liability is opened at the tax office; depending on activity, social security, chamber registration and any permits or licences are handled.

After incorporation

1. Open a bank account: A company account is needed for payments and collections.
2. Set up accounting: Work with an accountant; plan invoice, book and filing calendar. See accounting and tax basics.
3. Prepare invoicing and record systems.
4. Register the trademark: See the trademark guide.
5. Prepare legal documents: Employee contracts, confidentiality and terms of use; see the legal checklist.
6. Assign IP to the company: See the IP guide.

Costs

Main cost items are registration fees and announcement costs, notary or power-of-attorney costs, accountant fees, bank charges and monthly bookkeeping fees. Amounts change over time, so consult official sources and your accountant for current figures.

Timing

When documents are fully prepared, incorporation usually completes in a few business days; missing documents and name issues extend it.

Common mistakes

• Preparing the articles carelessly: Changing them later is costly.
• Not writing share ratios down: Disputes arise between partners.
• Misunderstanding capital obligations: An unpaid capital commitment creates partner liability.
• Delaying accounting: Risk of penalties and delays.
• Incorporating but never starting activity: Obligations can continue even without activity.

FAQ

Can one person set up a limited company? In many countries yes; verify current regulation.

Can the trade name be changed later? Yes, but it needs new registration and costs.

Can a partner be added later? Yes, through share transfer or a capital increase, per the articles.

Conclusion

Incorporating a limited company is a simple process when properly prepared. What matters most is writing agreements between partners clearly and not neglecting accounting and legal duties after incorporation. Also see our article on 10 things to know before starting a company.