If you’re setting up a new business in the UK, you need to decide what legal form your business will take. If you want to form a limited company in the UK, you need to register the company at Companies House. It’s no longer a complicated job registering a company with Companies House. However, there are a key number of steps you need to take and some thought that needs to go into the process.
What is incorporation / limited company?
Incorporation is the process by which a new or existing business registers as a limited company. A company is a legal entity with a separate identity from those who own or run it. The vast majority of companies are limited liability companies where the liability of the members is limited by shares or by guarantee.
You may also have heard of limited liability partnerships (LLPs), these are different to limited companies. Both a limited liability partnership (LLP) and limited companies limit the amount you lose if you go bust. But partners in an LLP earn money and pay tax separately. With a limited company, it’s the organisation that earns the money, then pays the owners salaries and dividends.
If you’re looking to set up a business with somebody else (or more than one person), you’ll need to decide whether that should be an LLP or a limited company. At first glance, they look pretty similar. Both types of business have to be incorporated at Companies House, involve more admin than being a sole trader or traditional partnership, and have the word ‘limited’ in them. But there are big differences.
How to form a limited company?
Some people still prefer to use a company formation agent or accountant to undertake the registration. This ensures that the full registration process is followed, and they will also provide all the correct documentation that you need. Here at dns accountants, our team can provide company formation and company incorporation services to business start-ups and clients that takes the hassle away, so it’s worth considering still getting someone else to go through the process for you.
However, it is possible to undertake the company formation process yourself using this guide if you feel confident to find out everything you need to register your business.
Here’s the 10 steps you need to take for incorporating an existing business or registering a new company:
Step 1: Do you need to set up a private limited company?
This guide shows you how to register a new limited company. However, before you begin the company registration process, it’s worth considering if you need to set up a limited company and need to register it at Companies House.
Deciding what sort of business you want to own is important, you could be a sole trader, partnership, LLP or a limited company. Each business type has its advantages but with a limited company you have limited liability, limited companies are often more tax efficient and can convey more credibility and prestige. But there’s also a need to maintain company records and file accounts and other documents with HMRC and/or Companies House, which means additional cost and paperwork.
Being a sole trader means you’re personally liable when something goes wrong. So, think about the type of business you’re setting up – and the risks involved. This is where it can be a good idea to get professional advice from an accountant at this stage if you’re not sure.
However, it is possible to undertake the UK company formation process yourself using this guide if you feel confident.
Step 2: Choosing a company name
Not only is your company name an important part of the registration process, but it can be one of the most important decisions when setting up your business. With thousands of businesses in the UK, finding a company name that isn’t already registered can be hard.
There are several rules you need to be aware of around choosing a company name, when registering a new company.
The most important thing to remember is that it needs to be different from any other company name that already exists. Sounds hard? How will you know business names that already exist? Thankfully, it’s easy. Companies House has a company name availability checker which will check all UK companies registered at Companies House and tell you if your proposed name is an exact or similar match to an already registered company. Our advice when registering a new company is to avoid any similar or exact company name matches. There could be serious consequences and issues further down the line with your business.
Also remember when choosing a company name to check if the url (website address) to go with the company name is available for you to purchase. A strong website url today can be very important to many businesses.
When undertaking company formation on your behalf, our team does all the relevant checks on company names for you to minimise the risk and get it right the first time for you.
Step 3: Choosing Directors and Shareholders
Every limited company needs at least one director (someone responsible for running the company), but it can have more.
When setting up a limited company, a director must be 16 or over and their responsibilities will be both legal and financial for the business, so choose your directors carefully.
Your company also requires at least one shareholder. Shareholders can also be directors. There are no limits on the number of shareholders a limited company has.
You also need to identify the people with significant control (PSC) in your business and notify Companies House on your company’s PSC register. PSCs need to have more than 25 percent of shares and voting rights in the company and the right to appoint or remove the majority of the board of directors.
Step 4: Get all the details you need in one place
Below is a quick checklist of information you’ll need to register your company:
- The company name.
- The registered office address you wish the company to be registered at. You can use a service address (i.e. your accountants) if you wish to.
- What it is your new registered company will do (There are Standard Industry Classification Codes in the UK which you will have to use to describe the nature of your business/activities your business will undertake).
- Details of company director(s) and potentially company secretary details –there must be at least one director aged 16 or over for a new private limited company. It is also worth considering whether you list your spouse as a director or company secretary in your business if something should happen to you.
- An idea of the share capital to be created – A company limited by shares is the most popular company type. For a private company limited by shares, at least one share must be issued. Remember the division of ordinary shares will dictate the proportion of dividends paid out.
- Shareholder details – there must be at least one initial shareholder, who can be the same person as a company director.
- Person with Significant Control (PSC) – you need to decide who will be identified as PSC, as they will have extra company responsibilities.
Step 5: Prepare documents such as Memorandum and Articles of Association
The Memorandum of Association is the legal document that all your initial shareholders sign, agreeing to form a company. It’s created automatically when registering your business online.
You will need to file appropriate documents such as a Memorandum of Association with Companies House. This is a document that details why you’ve set up the company, and how you plan to run it. This document can be legally significant when it comes to any future tax disputes or legal proceedings.
The Articles of Association are written rules about running the company, agreed by the directors and shareholders. You can use model articles as a template or create your own.
It is possible to write the documents yourself or download examples online. You may want to take professional advice before filing them. Many formation companies will include the writing and filing of these documents in their company formation services.
Step 6: Register a company with Companies House
Now you’ve gone through the first 5 steps of the registration process for your business, got the correct documents etc. you are ready to register with Companies House. There are several options on how to do this with different costs.
The cost for registering with Companies House will depend on the way you send your application, and whether you do it yourself or pay a third-party company.
Online filing through dedicated software – the standard fee is £10.
If you don’t have dedicated software, you can register yourself online, this can cost as little as £12 to register online.
If you register by post/paper filing the fee is £40.
Same day registration is £30.
Company registration fees can be paid by debit or credit card, or PayPal.
Here at dns accountants, we can do your online registration, take away all the hassle and provide the correct documents for you. Find out more about our registration services here.
Step 7: Gain company formation approval
If you are setting up a limited company, you need to register and receive approval from Companies House before you start to operate the business as a limited company. They’ll undertake some checks of the information submitted. Thankfully, with online filing, this can be done the same day or within 24 hours. Once youve gained approval, youre ready to get started with your business.
Step 8: Hold the company’s first board meeting
Once your company is registered, you’ll need to hold a meeting of the directors to cover some formalities. It’s best to do this within a few weeks of registering the company and take formal notes/minutes of the meeting.
In the first board meeting, the directors can also authorise the issue of share certificates for the shareholders in the company. Although you don’t legally have to issue share certificates, as the Register of Members is enough to evidence that someone is a shareholder in the company, many companies still create and issue share certificates.
Step 9: Keep accurate records
It’s critical to the running of your business and to remain legally compliant that you keep accurate records. You need to keep company and financial / accounting records. Failure to keep accurate accounting records can result in a £3,000 fine or being disqualified as a company director.
Company records need to include the following:
- the results of shareholder votes and resolutions
- loans that the company are due to repay in the future (debentures) and who the company needs to pay them back to
- the payments a company makes if the company does something wrong (indemnities)
- share transaction details
- loans and mortgages secured against company assets
Business financial and accounting records should include:
- money spent and received
- assets owned
- debts owned
- stock owned
- stocktaking to work out the stock owned figure
- goods bought and sold
You will need to file a company tax return and all business records should be kept for six years from the end of the last company financial year.
You’ll need to set up and maintain company registers which include:
- Register of Directors
- Register of Directors’ Residential Addresses
- Register of Secretaries
- Register of Members (otherwise known as Register of Shareholders)
- Register of People with Significant Control
- Register of Allotments of Shares
- Register of Share Transfers
- Register of Mortgages & Charges
Step 10: Other tasks to consider after registering a new company
There’s lots of other things to consider when setting up a new business and you’ve gone through the company formation process with Companies House. For example:
- Setting up a business bank account
- Registering with HMRC for VAT
- Registering with HMRC for Corporation Tax
- Registering with HMRC for PAYE if you employ people
- Registering a trademark
How long does it take to register a company?
Gone are the days when you had to pay a fortune file paper forms or wait weeks for approval. A new business can be registered with Companies House in a matter of hours. An online application can take as little as 24 hours, a postal registration will take eight to ten days or you pay the premium for a same day registration which can be done if you register online before 3 p.m.
So, whether you’re starting your first business or incorporating an existing company and need help with company incorporation, there are a number of things you need to think about to register your company with Companies House.
If you need any help with setting up your business, whether it’s registration, getting the right documents or just some advice, then dns accountants can provide everything you need. Our team can offer this service to you to take away the hassle and make sure you get it right the first time. We offer free company formation with the setting up of a bank account and free bookkeeping for new clients. We’re here to help you get started on your business journey. Contact us today.
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