How to start a company?
How to register and set up a Limited Liability Company?
If you are planning to start a business in the UK, there is a set procedure to follow. If you are not sure where to begin, then don’t worry, we have prepared a perfect guide that will help you set up your company seamlessly.
How to start a company?
There are primarily three ways to set up a company in the UK.
- You can register your firm with Companies House.
- You can purchase an ‘off the shelf’ company. You can then change its directors and appoint new ones.
You can hire a company formations agent to help you with the process.
There are some things that you should decide before setting up the company:
- You have to determine the name of the company and the address at which you have to register your business.
- You have to determine who are the shareholders and the directors.
- You have to determine the number of shareholders you plan to keep and what rights are entitled to each shareholder.
After deciding the basic structure, you will then have to complete the following tasks:
- Work out all the compulsory paperwork that includes Articles of Association, Memorandum of Association and Statement of Capital.
- Your business will need to be registered with Companies House.
- You will also have to register for taxes with HMRC.
Our accountants have prepared this guide to let you know about the key responsibilities when working as an entrepreneur and highlights all the areas of concern.
What are the common errors & mistakes people make when forming a company?
According to Companies House, 640,000 businesses were incorporated in the year ended 31 March 2017, of which 99% registered online. Out of the 99 %, there were 8% that were rejected.
More than half of the business applications that were manually submitted were rejected.
Here are some of the most common errors identified that lead to rejections
- Not verifying whether the company name is already registered, you can check if your company name is already registered here.
- Failure to consistently mention the same name on the registration documents
- Incorrect memorandums.
- Not disclosing the full names of directors or officers. Just writing the initials of the name is considered incorrect.
- Mentioning the individual’s nationality using an unacceptable or incorrect format.
- Using sensitive or offensive term(s) in your company’s name.
What are the considerations to keep in mind when deciding a company name?
When setting a company name, begin by checking whether you can use the proposed company name or not:
- The legislation does not allow two different companies to use the same or similar names. You can check the Companies House register to see if the proposed name is unique or not.
- We advise you to go through the trademarks register held by the Intellectual’ Property office to make sure that you are not violating any rules by using an existing trademark. If you would like to register a trademark or learn more about trademarks you can head over to our Trademark FAQ’s page.
You must ensure that the proposed company name should not be the ‘same as’ or ‘too similar’ to an already registered name. The ‘same as’ or ‘too similar’ names will be where the only difference between the two names is:
- A unique character, for instance (+,& )
- A punctuation
- Words (one or more) mentioned in Companies House guidelines
- Tyre UK Ltd and Tyre’s Ltd are the same as ‘Tyres Ltd’
- Shopnow.com Ltd is too similar to Shop now Ltd
The use of the ‘same name’ for a company is only permissible if the company is part of the same group or are authorized by the original company to use it. You might be requested to change your company’s name if some other company has reservations or legally pursues copyright.
There are other rules and considerations to keep in mind when selecting a name.
- Your company’s name must end with Limited/ Ltd or the Welsh equivalent.
- Ensure that your company’s name does not offend any party, company or individual.
- Your company name must not show any association with the government, a devolved administration, local or public authority.
- Use of specific punctuation, symbols or characters is not allowed. You may check Companies House for further information.
- Use of sensitive words or expressions is not permitted until approved by the concerned authority.
What do you need to know about the registered address?
Your company’s registered address is where all the company registers will be held and where Companies House and HMRC will send official notices. So, it is essential to know everything you need to do to get your address registered legally.
- You must ensure that you choose a physical address. You can use an address with a PO box that must be accompanied by a proper physical address and postal code.
- You must ensure that the company must reside in a country where it is registered. For instance, if you register a company in Scotland, then the company’s registered address must be in Scotland.
If you use your home address, then be careful as this address will be publicly available on the register of Companies House.
You can also use your accounting firm’s address if your company does not have a physical premise yet. Of course, you will have to take your accountant’s permission before using their address and potentially pay a small fee for it.
What do you need to know about setting up Shareholders for your company?
Shareholders are the owners of a company. They are legally allowed to take dividend income and vote in the matters of the company depending upon the ownership rights they are entitled to according to the articles of association and the class of shares they hold.
- There should be at least one shareholder on board when registering a company with Companies House.
- There is no limit to how many shareholders a company can have on board.
- Shareholders can legally be directors of the company as well as shareholders.
What do you need to know about ‘Directors’?
You need to know that the Directors you appoint for your company will be the ones responsible for the paperwork and management of the day to day affairs of the company, while also being responsible for filing accounts and tax returns. Any Director failing to fulfil his/her responsibilities may lead the company to pay heavy financial penalties, so be careful to vet carefully when appointing them.
There should be at least one appointed director on board when registering a company. You can keep as many directors as you want.
- Must be 16 or over
- Must not be barred or disqualified from working as a director
- Must not be an undischarged bankrupt, unless allowed by the court.
You can appoint another company as a director, but you must ensure that there should be at least one real person appointed as a director.
You should remember that the name of the directors and the registered address will be publicly available on the register of companies house after incorporation. However, if the directors require privacy they can ask Companies House to remove their address from publicly available registers.
As a private limited company owner, you are not liable to hire a company secretary. If you hire one, then that individual/company can be the company’s director but cannot:
- Be the company’s auditor
- Be an undischarged bankrupt, unless allowed by the court.
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What do you need to know about Shares?
When registering a company, you must ensure that there is at least one share available to issue. You need to work out the following early on:
- Decide how many shares do you plan to release and with what nominal value?
- Decide the proportion of the shares you want to issue to the shortlisted shareholders to avoid any ownership conflicts later on.
- Decide the shareholder’s rights you want to entitle on each share to determine their rights to dividend income and voting power. You need to be careful about exclusive rights as these can mitigate the chances of claiming several tax reliefs.
- Determine if you want to issue more than one class of share
We advise you to speak to a competitive startup accountant to know more about the structure of shares and to help you select an ideal one for your type of business.
What do you need to know about the paperwork?
There is extensive paperwork involved when registering a company with Companies House. You will need to prepare the following documents:
- Articles of association- A document that sets out all the details on how the company will be managed and run by the directors and shareholders.
- A memorandum of association- An agreement between every shareholder to form the company
- A statement of capital- A document that discloses all the information about the shares, equity and shareholders
There are a lot of considerations and rules to follow when preparing these documents. So, it’s advisable to speak to an accountant to help you set up these documents as per legal requirements.
What do you need to know about the registration process?
You are legally required to register your company with Companies House.
You can incorporate your company with Companies House in two ways:
- Register online
- Register by post
If you wish to register online, you have to ensure that your company is limited by shares and utilizes standard articles of association.
If you wish to register your firm by post, you have to complete and submit form IN01.
- Postal application fee: £40 (May take up to 8-10 days)
If you want to register by filing a paper on the same day, then you can avail this urgent service by handing the application to Companies House by 3 pm. Ensure that you write ‘same day service’ on the top left corner of the envelope.
‘Same day service’ fee: £100
Requirements to complete the application (checklist)
- Your company’s name and registered address
- Documents:- The articles of association, memorandum of association and statement of capital
- Complete information about the appointed director(s)
- Complete information about the company secretary (if you have at least one)
- Information about the shareholders, especially the ones who shares are worth at least 25% and exercise robust control over the company.
- The Standard Industry Classification (SIC)
What do you need to know about your tax responsibilities?‘
Once you officially registered with Companies House, you will be legally required to disclose your company with HMRC for tax purposes within the first three months of launching the business.
You can register online by using HMRC’s online services. You will be requiring your unique Taxpayer Reference (UTR), which you should receive at your registered address soon after registering your company.
Your company will also need to register for VAT. Registering a company with HMRC for tax and especially VAT can become frustrating, so it’s advisable to make everything easier by speaking to either a VAT accountant, tax accountant or business accountant.
What if you did not receive your UTR?
If you did not receive your Company UTR, you have to inform HMRC and request them to send another to the same address.
Once you successfully register your company, you will come across several administrative and legal responsibilities that you have to fulfil. We advise you to speak to an accounting firm to know more about the supervisory duties and challenges you’ll likely come across.
Clear House Accountants are innovative Accountants in London, who provide services to startups and small to medium-sized businesses. Our startup accountants and amazing accountancy services make sure that all your financial affairs are dealt with professionally and proficiently.