Company Formation

Understanding the Company Formation Procedure in the UK

In the United Kingdom, companies are formed under the 2006 Companies Act. Under this act, which is also backed up by the Insolvency Act of 1986, the European Union, and the UK Corporate Governance Code, a company has the responsibility of running and organizing a business. In this case, there are typically two types of companies;

• Private owned companies
• Public limited companies

To get a better understanding, we are going to look at the company formation procedure of the two types of companies.

Private Owned Company

Private owned companies are formed and owned privately by a few individuals in a separate legal entity. In this case, the shares of such a company cannot be traded publicly. These companies restrict their number of shares and a shareholder is prohibited from selling his shares without the approval of the other shareholders. In addition, a privately owned company doesn’t send an invitation to the public to subscribe to its shares.

Also known as Limited Companies, these types of companies are the most common in the UK and are very simple to form. You can choose to form them online using the services of an accounting firm such as ourselves or lawyers, a licensed company formation agent or directly through Company House. Using the services of WeAccountax to form a limited company is affordable and simple.

All you need to do is fill in the details of your company in our online company search engine. This will help us determined the availability of your chosen company name. It will only take a few seconds. From our limited company formation packages, you can choose the one that suits you, make a payment, and then submit your order.

Public Limited Company

Unlike private companies, a public company limited is known for offering its shares to the public. However, these companies are initially privately owned until they become listed either on the Alternative Investment Market or the London Stock Exchange. Since these companies have the significant interest of the public unlike private owned companies, they require a long list of compliance to help them acquire a public interest.

It is important to note that public companies are not obligated to sell their shares to the public or get listed on either of the above stock markets. You can also easily convert your private company limited into a public company limited and vice versa.

Benefits of Establishing a Private Limited Company

• In its own right, a Private Limited Company is a legal entity and its finances do not get mixed up with your personal finances.
• Running a private limited company gives you protection against personal liability. In this case, your personal assets will not be affected in case your business fails
• By starting a company, it becomes easier for you to borrow funds, raise capital, and achieve financing since the company increases your credibility while at the same time minimizing personal risk.
• Having the responsibility of running a limited company increases customer and supplier confidence in your business.
• Private companies are governed by a constitution which guides the shareholders and the directors in regulating their relationship with the company and with each other.
• The lifespan of private companies is indefinite and their existence doesn’t cease with the death of the shareholder or director.
• There are tax benefits associated with running a limited company in the UK
• The structure for private companies is suitable for both profit and non-profit business entities.
• Limited company formation UK is cheap and simple but a wise method of protecting the business name.

Benefits of Setting-Up a Limited Company

The process of forming a limited company is complex and especially if you couple that with assigning financial and administrative responsibilities. When you compare the requirements with those of forming a sole proprietor, the latter is way cheaper and straightforward. However, there are several advantages that are associated with setting-up a limited company, hence giving you a choice to make depending on your current circumstance. A limited company has the following benefits;

• As the owner of a limited company, your personal assets are protected in case there arises the need to recover company losses
• Unlike sole proprietorships and partnerships, limited companies have a clearer picture of the nature of the business hence increasing their credibility with banks, creditors, and other financial institutions. It is therefore easy for you to access investment funds when running a limited company.
• Running a limited company gives you access to a un-ending pool of affordable finance which comes in terms of preference and ordinary shares from the stock market. The case gets better if your company is publicly listed. In addition, your business is easily listed on various stock markets from around the globe giving you the opportunity to amass cheap finance worldwide.
• Running a company gives you the opportunity to be levied a corporate tax which is never the case with income tax. In addition, there are also other tax benefits associated with running companies.
• A company increases customers and supplier’s loyalty since there is a long-term commitment to the business unlike in the case of sole proprietorship and partnerships.
• Your level of professionalism increases since many large corporations prefer doing business with companies instead of partnerships or sole proprietors.
• Once you have your company name registered by the Company House, you automatically become protected by the law such that no other business can adopt the name or come up with a name closely related to yours. This makes it hard for your competitors to copycat your products and services and even if they do, your loyal customer base will always be able to tell the difference be comparing business names.
• Having a limited company makes it easy for you to sell stakes within the company or transfer your ownership through the selling of shares to your fellow shareholders.

Requirements for Cheap Company Formation in the UK

Choosing the company name

Once you make up your mind that you want to form a limited company, you must look for at least one name which you want your company to be registered with. The name must be ending with either “Limited” or “Ltd”. Once you present us with your proposed name, we are going to run it through our database and establish whether it has been taken by another company or it’s still available. In some cases, the name might still be available but the Companies House may refuse to register the company if the name;

• Sounds offensive
• It is deliberately misleading and misuses the name ending or it is confusing
• It consists of banned characters, punctuation marks, signs, and symbols
• It has sensitive words or expressions
• It has a close connection with the central or the local government or any other public authority

Once we check the availability of your submitted company name but have doubts about the choice of the name, we are going to contact you and advise you further on any necessary changes.