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.
Upon creation of a private limited company, you must issue at least one share. However, there is no limitation on the number of shares the company can have or the value of each share.
The accounting period of your private limited company starts on the first day of incorporation. Make sure you maintain your company books and accounts in an accurate manner as you will be required to file your financial statements within 9 months after the end of your limited company’s financial year.
A registered office for your company
You must have an office for your limited company in the county of your incorporation. However, the office doesn’t necessarily stand for the address of your business and can be that of your lawyer or accountant. The address is important since it is where all government correspondences will be sent. In addition, all official letters of the business must include this address.
Requirements for Ltd Company Formation
Once you have decided to set up a limited company in the UK, you need to work with the best company formation agents to help you with understanding the requirements for completing the process. Fortunately, WeAccountax will be more than willing to help you with the process. All you need to do is fill in the details about your company on our online registration system outlining all the details about your business structure. We offer ltd company formation in Jersey, Belfast, and Santander.
Limited company formation in the UK is easy since the government has made efforts to remove all the bureaucratic barriers that might make it impossible to form a company. With that said, the following are the minimum requirements for forming a limited enterprise in the UK.
- The company must have at least one appointed director
- The directors must be at least 16 years old
- The company must have a registered address in the UK
- The company must have a unique name that is in no way similar or closely related to any other company registered by the Companies House
- The company must have one naturally appointed director
- Limited company in the UK don’t necessarily need to have the shareholders, secretaries, and directors based in the UK but you must ensure you have someone who is at least 16 years appointed to be based in the country
- If you are running a private limited company, appointing a secretary is optional depending on whether you want someone to help you in admiration or not.
- Corporate bodies can act as shareholders, directors or secretary of the limited company. However, you must have another natural person who acts as the director
- When setting up a limited company, you can use the home address of one natural director when registering the company. However, you must be aware that the address will be publicly listed on the Companies House website. Instead of taking the risk, you can buy a private address service for the company which you can renew on an annual basis.
Legal Documents You Receive from Us after Registering your Company
We offer you cheap company formation services and provide you with all the necessary documents required when running a limited enterprise. After registering your company, we provide you with the following documents;
- Memorandum of Association– this documents lists the initial shareholders making up the limited company
- Certificate of Incorporation– this is the legal document that shows you have formed a corporation. The document acts as proof that the company has been incorporated under the 2006 Companies Act
- Articles of Association– this consists the rules that bind the company members in order to ensure the smooth running of the company. The changes in this document are only possible if the shareholders exercise their voting rights.
- Statement of Capital Holding– this documents outlines the names and addresses of the company directors, the address of the registered company, and the number of share capital of the company
Once the documents are ready, they are taken to the registrar of companies for more processing. Once the formation process is complete, the board holds their first meeting where they prepare the register containing information on the shareholders and the company directors. This information is updated on a regular basis to ensure any changes are recorded.
Why You Should Choose Us to Help You with Company Formation
The entire company formation procedure is complex and especially if you don’t know where to start or how to go about it. Fortunately, WeAccountax is made of a team of experts who are well versed in the entire formation process. Whether you approach us for company formation in Luxembourg, Gibraltar, and London or simply looking for best services for offshore company formation 2018, we are going to assist you.
We take the entire formation and registration services in a procedural manner and our first step when you approach us is carrying out a feasibility study on your business. From the study, we provide you with a detailed report that helps you understand both monetary and non-monetary benefits you will realize from forming the company.
We then analyze the nature of your business and help come up with a marketable and unique name for your company. We ensure that the name covers all aspects of your services and is also attractive to your potential customers. Finally, our experts in the legal framework work hard to ensure you get all the necessary documents within your time limit and that your company is up and running as you had anticipated.
After your limited company is up and running, you can entrust us with other services such as taxation and accountancy services. Since we are by your side from the beginning of your company, we have a better understanding of your business and can, therefore, offer exemplary services that will see the prosperity of your company.