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Setting Up a Limited Company in Scotland

A step-by-step guide to incorporating a limited company in Scotland — from choosing a name to filing your first accounts.

Last updated: August 2026

Why Incorporate?

A limited company is a separate legal entity from its owners (shareholders) and managers (directors). This means your personal assets are protected if the business fails — your liability is limited to the value of your shares (usually £1). Beyond liability protection, incorporation can offer significant tax advantages once your profits exceed approximately £30,000-£40,000 per year, as Corporation Tax rates and the salary/dividend split are typically more favourable than income tax and National Insurance as a sole trader.

Step 1: Choose Your Company Name

Your company name must be unique and not too similar to an existing registered company. You can check availability on the Companies House name checker. Key rules:

Must end with 'Limited' or 'Ltd' (or Welsh equivalents)
Cannot contain sensitive words (e.g., 'Royal', 'British', 'Authority') without permission
Cannot be offensive or suggest a connection to government
Your trading name can differ from your registered name — many businesses trade under a different name
Scottish companies are registered at Companies House Edinburgh but follow the same rules as English/Welsh companies

Step 2: Registered Office Address

Every company needs a registered office address. This is where official correspondence from Companies House and HMRC will be sent. It must be a physical address in Scotland (or England/Wales if you prefer — there's no requirement for a Scottish company to have a Scottish address, but most do). You can use your home address, your business premises, or a registered office service. Note: this address is publicly visible on the Companies House register.

Step 3: Appoint Directors and a Secretary

You need at least one director who is a natural person (not another company). There's no requirement for a company secretary for private limited companies, though you can appoint one. Directors' details (name, date of birth — month/year only publicly visible, nationality, occupation, and a service address) are filed at Companies House.

Directors must be at least 16 years old
There's no maximum number of directors
A director's service address can differ from their home address (for privacy)
Directors have legal duties under the Companies Act 2006 — including acting in the company's best interests and avoiding conflicts of interest

Step 4: Issue Shares and Appoint Shareholders

Most small companies issue a simple share structure — typically 100 ordinary shares at £1 each. Shareholders own the company and are entitled to dividends. A director can also be a shareholder (and usually is in small companies). You'll need to decide:

How many shares to issue (100 is standard for simplicity)
The nominal value of each share (£1 is most common)
Who the shareholders are and how many shares each holds
Whether to create different share classes (e.g., alphabet shares for tax planning with family members)

Step 5: Prepare Your Documents

To incorporate, you need:

Memorandum of Association — A legal statement that the subscribers wish to form a company. Standard template available from Companies House.
Articles of Association — The rules governing how your company is run. Most small companies use the Model Articles (standard template) which are perfectly adequate.
Form IN01 — The application for registration, containing all the details above.
SIC Code — A Standard Industrial Classification code describing your business activity. You can find the right code on the Companies House SIC code list.

Step 6: Register with Companies House

You can register online (typically processed within 24 hours, costs £12) or by post (takes 8-10 days, costs £40). Once registered, you'll receive a Certificate of Incorporation confirming your company number and date of incorporation. Your company now legally exists.

Step 7: Post-Incorporation Setup

Once incorporated, you need to:

Register for Corporation Tax with HMRC — within 3 months of starting to trade
Set up a business bank account — you cannot use a personal account for company funds
Register for PAYE if you'll be paying yourself a salary
Consider VAT registration if your turnover will exceed £90,000 or if voluntary registration benefits you
Set up accounting software — we recommend Xero for most new companies
Arrange appropriate business insurance
Understand your filing obligations — annual accounts, confirmation statement, Corporation Tax return

Common Mistakes When Setting Up

We see these regularly with new incorporations:

Not registering for Corporation Tax promptly — HMRC can charge penalties
Using a personal bank account for company transactions — this undermines limited liability
Not understanding the difference between company money and personal money
Choosing an inappropriate year-end date (we usually recommend 31 March to align with the tax year)
Not keeping proper records from day one — it's much harder to reconstruct later
Forgetting to file the Confirmation Statement annually — £5,000 penalty and potential strike-off

How RJ Hart Can Help

We handle company formations for clients regularly. We can incorporate your company, set up your accounting software, register you for all necessary taxes, and ensure you understand your obligations from the outset. Many clients find that getting professional support from day one saves significant time and avoids costly mistakes down the line.

Need help with this?

Our team can provide specific guidance tailored to your circumstances. No jargon, no obligation.

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