UK Limited Company Formation - An Overview
Jun 02, 2019
The British government makes it easy to set up a company but that doesn’t mean you can be casual about it.
However, if you get the name, directors and shareholdings right from the start and you can be up and running in 48 hours or less:
Start a company formation purchase today
The following is an in-depth, detailed guide about setting up a UK limited company, with tips about the choices you may have to make along the way.
First, here are some basic Do’s and Don’ts:
– Keep it simple;
– Take your time;
– Be meticulous;
– Ask for advice;
– Get someone else to do it if you’re not sure.
– Don’t try to register a version of an existing or popular name to ‘steal some of their glory’;
– Don’t try to use words like Bank, Insurance, Society or Royal in the company name;
– Don’t have a large shareholding like £1,000,000;
– Don’t have your friends or family members as shareholder or directors, unless it’s absolutely essential;
– Don’t have any shareholders or directors besides yourself, unless it’s absolutely essential (you’ll thank us later).
Why form a company in the UK and not your own country?
Here are 9 reasons why forming a company in the UK is the smart move. It can be as easy, if not easier, than doing it in your home country.
1. Low Staffing Overhead
You only need one person to form a limited company in the UK. This person is you. You can be director and shareholder. The shareholder is the owner of the company.
2. International Directors Are Acceptable
You can live in a foreign country and be the sole director of your UK company.
The company has to have a mailing address here but you can live abroad.
3. Low Fees
Companies House charges less than £20 GBP to set up at company at their site and the same when you file your annual return. The UK wants your inward investment and tax receipts.
4. Ease Of Setup
If you have a minimal understanding of business terms you can set up a company yourself at the Companies House website, or, get a formation agent like ourselves to do it: Start here.
All you need to know is who the director and shareholder is to be (you) and how many shares and at what value you want to issue, typically: 1 share @ £1 ea.
5. Ease Of Maintenance
You file 3 annual returns to the UK government to maintain your company:
1 administrative, to Companies House
1 financial, to Companies House
1 financial, to HMRC (the UK tax department)
Read more here: Annual returns - avoid the nightmare
6. Low Local Taxation
Currently it’s 20% at the lowest rate. This is worth paying because your company is registered in a …
7. Stable Society
The UK doesn’t do revolutions. England is an orderly society. It is very rare to have serious civil disturbance. This means your company and your money is safer.
8. Good International Reputation
Go to diverse countries like India, Japan and Brazil and it’s likely the locals will find Britain quaint and interesting, in a way that Germany, for example, would not be!
9. Limited Liability
Limited liability protects shareholders from debts the company may have accrued. Note: it should not be seen as a way to get up to shar practice or criminality; it does not protect directors and shareholders from punishment for illegal activity.
It just stops vexatious claims from affecting the shareholders personally.
How It Works
– Search for your company name and choose a package.
– Complete the short application: Buy a company formation as part of your address package here.
– This is sent instantly to Companies House.
– All going well, your company is formed within 24 hours in the working week*.
(*Human beings at Companies House have to check your application, to stop people registering illegal names like ‘Royal Life Insurance And Banking Ltd’)
Typical mistakes are:
– Getting the directors and shareholders mixed up.
– Giving a shareholder too much of the company.
– Not realising that shareholders are the owners of the company, not the directors.
– Getting the date of birth of a director wrong.
– Not realising that the Director’s Service (or Correspondence) Address is public information.
– Setting share capital at £1m, not realising that it has to be accounted for.
– Not spelling the company name correctly.
Good news! These mistakes can be corrected later.
Bad news: It can take up to two weeks, and the error, and its correction, remain on the public record.
Tip: Are you sure you need one?
Maybe you can stay as a sole-trader; ‘John Thompson trading as SomeCleverName’?'
Pro: A limited company limits your personal liability if someone brings a legal action against your business. It can confer tax advantages. It lets two or more people own a share on one business. Being a limited company means clients will take you more seriously.
Con: It can also be a pain to maintain; you have to submit annual returns: UK limited company filing deadlines
Consider us if you want to form a limited company (LTD) and would rather not have your home address on the public record and ending up in multiple other databases.
– Ready to Trade Company (Limited by Shares)
– 24 Hour Online Formation, Monday – Friday
– Companies House Filing Fee Included (Save £s)
– Email Copy of Certificate of Incorporation
– Email Copy of Memorandum & Articles of Association
– Email Copy of Share Certificate(s)
– Registered Office Service, London
Proof of ID
We must confirm the identity and proof of address for any customer taking one of our address services, to comply with British Anti-Money Laundering (MLR) and Know Your Customer (KYC) regulations.
Q: What do I need to form a company?
Just one person (who is both director and the shareholder). You need to think up a unique company name and opt for 1 share at £1 ea; that’s the simplest. Some unique ID info from you will be required by our system, to filter out bogus submissions by unauthorised people e.g. colour of eyes.
– Our addresses are based in Central London and create a professional corporate image.
We suggest clients do not leave it until the last minute to purchase a company formation. Companies House currently takes almost a working day to form a company.
We are informed this is because their staff numbers have been cut back recently.
Start today here
Q: What’s the next step to register a company in the UK?
Well, you need to have certain details to hand. These are:
– Company name;
– Registered Office Address (which we can provide);
– SIC code (a number which defines roughly what niche the company will operate in);
– Shareholdings (who gets shares, how many and at what value);
– PSC (persons with significant control, usually the majority shareholder);
– Directors (who they are and what their home and correspondence address is to be);
– Memorandum and Articles of Association* (you can use templates).
(*The Articles of Association are the company’s statement of the rules of its’ operation; how it will operate. 99.999% of companies do not need to make up their own Articles. It’s expensive. It should only be done if your company has some non-standard composition or purpose and after taking legal advice.)
Be careful who you give shares to. Many people give 50% to a family member, friend or colleague only to find out later that:
1. This gives them 50% of the company and …
2. The right to 50% of the dividends (profits paid out) …
3. Without being obliged to contribute to the company in any way!
This can cause significant problems later on. Many company owners have found themselves saddled with a useless director or shareholder who is not contributing to the company or is even actively working against the company’s interests!
Here are the documents you get if you form a limited company in the UK:
– Articles Of Association;
– Certificate Of Incorporation;
– Memorandum Of Incorporation;
– Share Certificates.
The formation agent will typically email these to you, along with your Companies House Authentication Code. He may also post you printed copies. The latter can be useful when you go to your bank to set up a business bank account.
• Articles Of Association
This is a document that contains the purpose of the company and details the duties and responsibilities of its members. It is an important document which needs to be filed with Companies House.
In practice: company formation agents use a template for 99.99% of their clients, as small limited companies tend not to need special rules to operate. As a company is a legal body controlled by individual humans, it needs some rules about how it operates, to define what it and its members can and cannot do.
Some clients worry about this document and think they need to produce their own version. They do not.
The Articles can cover a medley of topics, not all of which are required in a country’s law. They may cover:
- The issuing of shares (also called stock), different voting rights after a shareholder dominates or shares equally with all stakeholders;
- Directors meetings – the quorum and percentage of voting;
- Management decisions – whether the board manages or a founder;
- Transferability of shares – assignment rights of the founders or other members of the company;
- Special voting rights of a Chairman, and his mode of election;
- The dividend policy – a percentage of profits to be declared when there is profit or otherwise;
- Winding up – the conditions, notice to members;
- Confidentiality of information and the founders’ agreement and penalties for disclosure;
- First right of refusal – purchase rights and counter-bid by a founder.
Only in medium to large companies can the above become a matter for argument; where there’s money, people will fight over it!
• Certificate Of Incorporation
This certificate confirms that a business has been incorporated under the Companies Act 2006, at Companies House, as a legal entity with its own identity. It’s like a birth certificate for a company. You may be asked to provide it when you apply for a business bank account.
Again, this is not something to fret over. It is generated automatically when your company is formed. You can get a replacement from Companies House if it gets lost or damaged.
• Memorandum Of Incorporation
This document typically, and only, states the following:
THE COMPANIES ACT 2006
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
Each subscriber to this memorandum of association wishes to form a company under the Companies Act 2006 and agrees to become a member of the Company and to take at least one share.
Name of each subscriber | Authentication by each subscriber
Again, this is a simple foundation document and nothing to get stressed about.
• Share Certificate
A share certificate is a certificate issued by a company certifying that, on the date the certificate is issued, John Smith-Jones is the registered owner of shares in the company.
– The name and address of the shareholder;
– The number of shares held by him.
Note: The shareholders are the actual owners of the company, not the directors.
A good formation agent will email you the above documents and, for a small fee, print them off and post them to you also. It is not essential to have paper copies, but they are more tangible and are useful for ‘show and tell’, especially with your bank.
When Limited Companies are formed standard template documents are used pertaining to shares and your Memorandum and Articles of Association. These do fine for 99.99% percent of start-ups, as most entrepreneurs just want a legal corporation between them and the people they trade with.
→ Start a company formation today