Roundtable Review

What’s the right business structure?
by Guest
Posted 27 November '14

Guest contribution by Olswang LLP, @Olswang

Olswang LLP is a partner of OneStart, the world’s largest life sciences & health care accelerator, organised by SR One and the Oxbridge Biotech Roundtable. Apply by 1 December 2014 to win £100k/$150k non-dilutive funding for your startup idea: learn more at oxbridgebiotech.com/onestart


For a startup, what’s the right business structure? Almost always, it is a company.

What are the advantages of a limited company?

There are several options to choose from when deciding how to structure your business.  You could set up as a sole trader, incorporate a limited liability company, form a partnership or incorporate a limited liability partnership. In practice, most – if not all – of you will incorporate a limited company.

There are many advantages of incorporating a limited company but, for you, the most important is that you won’t be able to get investors to give you money unless you set one up.  This is because a limited company has a separate legal personality and is responsible for its own actions.  As a result, the company’s finances are separate from the personal finances of the owners, so the investors know that their money will be spent on developing the business.

How do I set up a limited company?

Before you can start a business as a limited company, the company must be registered with Companies House (http://www.companieshouse.gov.uk/).  The registration process is straightforward and you can do this yourself, online, for only £15 via the Companies House website.

What documents will I need to complete to register a limited company?

The following documents must be completed and returned to Companies House:

  1. memorandum of association – states that you wish to form a company and contains the names and addresses of the subscribers who are forming the limited company and who will be its first owners;
  2. articles of association – the internal rules which govern how the company will be run.  Outlines the directors’ powers, shareholders’ rights etc;
  3. form IN01 – application to register a company.  Comprises details of the director(s), company secretary (if applicable), shareholders, share capital (if it is a company limited by shares) etc.

What are the different types of limited company?

There are two types of limited company: private limited companies (LTD) and public limited companies (PLCs).  A PLC has to have a minimum share capital of £50,000.  A LTD can have as little as a penny.  Most people therefore set up a LTD, and we expect that you would too.

What requirements must a limited company fulfil?

There are several requirements that a limited company must fulfil:

  1. the company must be registered at Companies House;
  2. the company’s annual accounts must be filed at Companies House;
  3. an annual return (Form AR01) must be completed each year;
  4. HMRC must be informed if the company has any profits or taxable income on an annual basis;
  5. the company must complete an annual corporation tax return.  Any liabilities must be paid within nine months of the company’s year end;
  6. the company must have a registered office.  This is where important correspondence is sent and statutory books are kept.  It does not have to be the company’s main place of business; and
  7. all company employees must pay income tax and National Insurance Contributions (NICs) on any income they receive.
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