Company formation services in Loughton

Company formations are not difficult, but you need to be aware of what you require to submit, and all the company details you need to register at Companies House. If you are not sure of some of the below, then it is better to use a company formation agent such as dns accountants to handle every aspect of your company formation.

Choose which type of limited company to set up

Once you’ve decided to set up a limited company, you have to choose which type of company to form. The types of companies you can register with Companies House are:

• Private limited company by share.
• Private unlimited company.
• Private limited company by guarantee ( no share capital )
• Limited liability partnership.
• Limited partnership.

Choose your company name

Your company name must be unique, so search the Companies House register before you decide on and submit a name. The name has to end in either Ltd or Limited. Certain words or phrases are prohibited from being used in your company name, like chartered, royal, and commission. These are regulated to stop companies from misleading customers about their qualifications or professional standing.

Choose company officers

Your company must have at least one officer or director listed as the primary person responsible for the business. A company director is ultimately responsible for the submission of reports and tax returns, as well as all notices of changes to company documents, like the registered office address, shareholders etc.

Other officers can be registered with Companies House too, like company secretaries, who are responsible for maintaining statutory registers, keeping minutes of board meetings, and ensuring all statutory filings are completed.

Registered office address

The recording of a service address and registered office address is a vital step for company formation. Any and all company directors must submit their residential address as well, though they can also submit a registered office address to be kept on the public record.

Here at dns accountants, we offer registered office address services, which allow you to use our address as your registered office address if you have not yet acquired a business premises or want to protect your home address from appearing on public records.

Other things to complete for Companies House

• The type of business activities your limited company will carry out by choosing a SIC code (Standard Industrial Classification code) for your business. You can select the most appropriate code from the SIC code list online.
• Nominate a person with significant control.

Identify a person with significant control

A person with significant control (PSC) is someone who owns or controls your company. They’re sometimes called ‘beneficial owners’.

You must identify your PSC and tell Companies House who they are. This might be you, or someone associated with your company. A company can have one or more PSCs.

You must record their details on your company’s PSC register, and you’ll need to include this information when you incorporate a limited company.

Preparing the company documents needed to form a UK limited company

To complete the incorporation process, you will need the following documents:

• Application to register a company and the fee.
• Memorandum of association.
• Articles of association (unless you adopt model articles in their entirety).

Open a business bank account

To complete the private limited company formation process, you must open a business bank account for your organisation. This remains separate from your personal finances and is used exclusively by yourself and business banking partners for the company's financial matters.

As a note, sole traders and those in non-limited partnerships are also able to open a business bank account, as a way to separate your businesses' financial matters from your own.

Many banks will offer a free business bank account initially as an introductory offer but then will charge for it after the free bank account period ends.

Find out more about choosing a business bank account here.

Choose your route to registering your limited company

You can register a UK limited company online or by post with Companies House yourself if you understand the company documents you need to create. The process is doable, but the company documents that need to be completed and submitted can be overwhelming for an individual, especially if it's your first time.

Many people opt to use a company formation agent to assist them in the process. At dns accountants, we offer a comprehensive company formation service, providing professional, experienced support directly to you while your new company is set up. Using an agent such as dns accountants to complete the company registration process for you, will be quicker, easier, and can minimise mistakes being made in the company formation process. Our free customer support is always there to answer your questions, allay your worries and make sure you can start your company hassle-free.

You must prepare a confirmation statement for Companies House every year, even if your company is dormant. This document used to be called an annual return and it confirms general information about a company at that point in time. This ensures that the details shown on public records (the ‘companies register’) are correct and up to date.

What information do I need to check and confirm on a confirmation statement?

The company details you must check and confirm on the confirmation statement are:

• Company name and registration number
• Registered office address
• SAIL address
• Location of company records
• Details of appointed officers (directors and company secretary)
• Information about PSCs (people with significant control)
• Principal business activities (SIC codes)
• Statement of capital (i.e. issued shares)
• Trading status of shares
• Shareholder information
• Exemption from keeping a register of people with significant control

These are statutory legal documents that define how the company is regulated and what rules it must follow in its day-to-day business.

Articles of Association are rules that govern the company, and which shareholders and directors have agreed. The articles outline the managerial and administrative structure and responsibilities of the business and include information on the rights of shareholders.

A limited company can choose to adopt the Model Articles of Association. These articles present a clear and concise framework that enables the directors to coordinate meetings, issue shares and pass resolutions (amongst many other things).

Though private limited company formation is generally the ideal option for starting a business, there are some areas one should be aware of. For example, you will need to submit annual accounts and pay corporation tax on profits.

Your company must be registered with HMRC in the first three months of trading activity. The filing of an annual company tax return is required by HMRC.

Registering with PAYE is also necessary for paying your own and any other salaries.

Finally, registering for VAT may be necessary, and is something many business owners opt to do anyway. In short, the tax requirements for starting and maintaining a limited company are more complex than those other company formation options.

Starting a private limited company in the UK is also a more time-consuming process. Registering for Corporation Tax and registering your company as Companies House is only part of the responsibilities you have when running a company. The above is only part of it.

Companies House workload is often significant, so you need to allow time to file all the relevant paperwork.

Whilst you protect your company name by registering it, it may also limit your naming options if another business already exists with the same name.

The Companies House filing fee for registering is less but is a cost you need to factor into setting up a company.

Finally, there are stringent rules for limited companies that have to be followed. Record keeping, the taking of meeting minutes, submitting annual company accounts, submitting an annual return and notifying Companies House of changes in company details, directors and share changes are all required to be submitted, monitored and regulated.

A private limited company registered at companies house is not the only route for someone looking to start their own business, so let's explore alternative options for your business idea.

Limited company

A limited company is a type of business structure, which is incorporated with Companies House in the UK and has its own legal personality/identity. This legal distinction means the company is separate from its shareholders and directors. If an individual opts to run the business as a limited company, the business will:

• be legally distinct from the person(s) responsible for running the business;
• maintain separate finances for both business and personal finances.

Advantages

• Tax benefits
• Separate legal entity
• Limited liability
• Protecting your company name
• Easier access to finance
• Credibility

Disadvantages

• More expensive to run
• Additional administration
• Company name may exist already
• Strict rules and annual filing requirements

Sole trader

A sole trader is an individual that is self-employed and who owns and runs their own business. A sole trader business doesn’t have any legal identity separate from its owner. So, fundamentally as a sole trader, you are the business. The biggest difference between a sole trader and a limited company is that you are personally responsible for any losses your business makes but can keep all the profits after you've paid taxes on them.

Advantages

Being a sole trader is a route many new business owners choose when considering UK company formation. It is the simplest company formation process and is also known as being self- employed. Notifying HMRC of your status as a sole trader within the first three months of business operations, and subsequently submitting self-assessment tax returns annually is all that is needed. Companies house requires no involvement, and there are no associated fees. You could start your own company today!

Disadvantages

The main issue is personal liability. If your company hits rough waters, like a legal case is brought against your company or you default on loan payments, you are personally responsible for rectifying the issue. This puts your personal bank account, other business ventures, even your home, at risk. Sole trading is also less tax efficient, and as anyone can do it, it is generally considered less prestigious or trustworthy compared to other company structure options.

Partnership

Advantages

Put simply, a partnership is akin to being a sole trader, only with partners. The company registration process is similarly simple, and someone having your back, especially if it is your first time starting a business, is an attractive prospect. All the issues that come with being a sole trader; the risk to your personal finances and legal standing are shared.

Disadvantages

If the risks associated with the proposed company are shared, then of course the benefits are shared as well. Any profits shared will be taxed for each partner individually, with the same tax inefficiencies mentioned above. It also means that you are held equally responsible for any problems caused by your partners. As they have significant control over the business, this could be disastrous for you and the business as a whole.

Limited Liability Partnership (LLP)

Advantages

The limited liability partnership route is comparable to working in an unincorporated partnership, with elements of a limited company mixed in. Companies house and HMRC must both be registered with to form an LLP, and reports from your annual accounts must be submitted with both bodies. LLPs offer flexibility for your business. There must be two or more partners, which can be businesses themselves. LLPs also do not pay corporation tax, unlike a limited company.

Disadvantages

Limited liability partnerships do have some issues. They are less tax efficient than other options. Each individual partner has to submit a Self Assessment Tax Return, pay income tax on their share of profits and make National Insurance contributions.

If you want to begin the company formation process, it can be a real hurdle to acquire a business partner, not to mention the sharing of profits and control. Liability in an LLP is shared and determined by the individual partner's size of investment into the new company. This in theory protects those with limited means. But it still puts them and the larger investors as liable for what could be other company directors' mistakes. This liability is personal in nature, just like as a sole trader. If your individual financial situation worsens over the course of the company's lifetime, the requirement to pay based on your original contribution still stands. This could be devastating in the long term.