If your online shop started as a side hustle and is now bringing in regular orders, you may be wondering whether it is time to make it official.
you can register a limited company for your online store online with Companies House for £100 at the time of writing, and most applications are approved within 24 hours. You do not need shop premises, and you can keep selling while you register.
Should your online store be a limited company?
Most UK online sellers start as sole traders because it is simple: you register with HMRC, keep records, and file a Self Assessment tax return. A limited company is a separate legal person. That separation is the main reason sellers switch. If the company runs into debt, your personal assets are normally protected, as long as you have not given a personal guarantee. A limited company can also look more credible to suppliers, marketplaces, and wholesale buyers.
There are trade-offs. A company must file annual accounts and a confirmation statement, keep proper records, and pay corporation tax on its profits instead of income tax on everything you take out. You also have to be more careful about separating business money from personal money. For a shop with only a handful of sales a month, staying a sole trader is often fine. For a shop with steady sales, growing stock costs, or plans to hire help, going limited is usually worth a serious look.
| Sole trader | Limited company | |
|---|---|---|
| Legal status | You and the business are the same person | The company is a separate legal person |
| Personal liability | You are personally liable for business debts | Liability is normally limited to the company |
| Tax | Income tax on profits via Self Assessment | Corporation tax on company profits |
| Public records | Your details are not on Companies House | Company details appear on the public register |
| Admin | Lighter | Annual accounts and a confirmation statement |
What you need before you register
Gather these five things before you start, and the form takes far less time:
- A company name. It must not be the same as an existing company name, and it cannot contain a sensitive word unless you have permission. Check it on Companies House first, and make sure it does not clash with your shop name or domain in a confusing way.
- A registered office address. This goes on the public register. Many home-based sellers use their home address, but if privacy worries you, a virtual office or accountant’s address is an option — just make sure official post will actually reach you there.
- At least one director. That is usually you. You must be aged 16 or over and not disqualified from being a director.
- Details of shares. Most small shops start with one director holding 100 ordinary shares of £1 each. That simply means the company is owned by you.
- A SIC code. This describes what your company does. For an online shop, the usual choice is retail sale via mail order houses or via internet — pick the code that best matches what you actually sell.
You will also need a Government Gateway account and the £100 registration fee, payable by card at the time of writing.
How to register a limited company for your online store, step by step
Follow these steps in order, and keep a note of every reference number you are given:
- Step 1: Check and reserve your thinking on the name. Search Companies House for your chosen name. If it is taken or too similar to another company, tweak it now rather than after you have printed packaging with it on.
- Step 2: Set up your registered office and director details. Decide on the address that will appear publicly, and confirm who the director and shareholders will be. If you and a partner run the shop together, agree the share split before you file, not after.
- Step 3: Complete the online application. To register a limited company, use the official Companies House service — the GOV.UK guidance on registering your company links you straight to it. Fill in the company name, address, director details, shares, and SIC code, then pay the £100 fee.
- Step 4: Wait for your certificate of incorporation. Most online applications are processed within 24 hours. You will receive a certificate showing your company number and date of incorporation. From that date, your shop is legally a company.
- Step 5: Sort the money side straight away. Open a business bank account in the company name, tell your selling platforms and payment providers about the change where needed, and keep all company income and spending separate from your personal account. Mixing the two is the most common early mistake.
A worked example: Sara’s candle shop
Sara sells handmade candles on Etsy and through her own website. In her first year as a sole trader she made £30,000 in profit, and every pound was taxed as her personal income. After she registered a limited company, the £30,000 profit belonged to the company, which paid corporation tax on it, and Sara then paid herself a mix of salary and dividends. The exact saving depends on her other income and the tax rates in force, so she checked the figures with an accountant before switching — but the £100 registration fee itself was the smallest cost in the whole move. The bigger change was discipline: separate accounts, monthly bookkeeping, and filing deadlines she could no longer ignore.
She also timed it well: she registered in a quiet month, not during her Christmas rush, so switching bank accounts and invoices did not disrupt orders.
What changes after you register
Registering is the beginning, not the end. Here is what now applies to your shop:
- Annual accounts must be filed with Companies House, usually within 9 months of your financial year-end.
- A confirmation statement must be filed at least once a year, confirming the company’s details are up to date. The fee is £50 at the time of writing.
- Corporation tax is paid on company profits, and a company tax return must be filed with HMRC.
- Your shop’s VAT position does not change automatically. You only need to register for VAT once your taxable turnover passes the £90,000 threshold, unless you choose to register voluntarily.
- If you employ anyone, even part-time packers, you must run payroll and meet employer duties.
Put every filing deadline in your diary on the day you incorporate, and consider an accountant for the first year.
Common mistakes online sellers make
Using a shop name they cannot legally use. Your Etsy shop name and your company name are different things. A company name can still be rejected even if nobody uses it on a marketplace.
Publishing a home address without thinking. Your registered office address is public. If you would rather not have your home address searchable, sort an alternative before you file.
Forgetting to tell payment providers. If payouts still go to a personal account in your own name after incorporation, your bookkeeping becomes messy fast. Update Stripe, PayPal, Shopify Payments, or whichever provider you use.
Treating company money as personal money. Taking cash out of the company without recording it as salary or dividends creates tax problems later. Pay yourself properly, and keep records of every withdrawal.
Missing the first filing deadlines. New companies often miss the first confirmation statement because nobody told them it existed. Diary it now.
Frequently asked questions
Can I register a limited company while still selling as a sole trader?
Yes. Many sellers keep trading as a sole trader while the company is set up, then switch their shop, bank account, and platform details over on a chosen date. Do not run the same sales through both at once without advice, as that muddles your tax records.
How much does it cost to register a limited company for an online store?
The Companies House online fee is £100 at the time of writing. Formation agents charge more for the same filing, so unless you want extra services, the direct online route is the cheapest option.
Do I need a business bank account for my online store company?
Yes, in practice. A limited company must keep its finances separate, and marketplaces and payment providers will expect payouts to go to an account in the company name. Open one as soon as you have your company number.
Does registering a limited company affect my Etsy or Amazon shop?
You will need to update your seller account details to the company name and, where asked, provide your company number. Your listings and reviews normally stay put, but check each platform’s own guidance before you switch.
Conclusion
Going limited is a natural next step when your online store stops being a hobby and starts behaving like a real business. It costs £100, it usually takes less than a day online, and it gives your shop a separate legal identity with limited liability. What it also gives you is responsibility: accounts, a yearly confirmation statement, and clean separation between business and personal money. If your sales are steady and you want room to grow — hire help, take on wholesale, or open a second shop — register in a quiet week, not in the middle of your busy season.
