When it comes to setting up a business in the UK, there are several processes to follow as well as plenty of considerations to make sure you have the right business setup for you. If you want to set up a business in the UK, it can feel overwhelming as well as daunting to know where to begin. To help you, this guide will take you step by step, so you know exactly what’s involved in UK company formation.
When setting up a business in the UK, there are several options to choose from. For simplicity, some will prefer the register as a sole trader. However, this means being personally responsible for business debts. Another option for businesses with two or more people at the helm is to set up a partnership which means you share the responsibility for the business debts.
While it is a longer process, many people prefer to set up a limited company. A UK limited company formation does mean there are more reporting responsibilities. However, limited companies help to keep your personal finances completely separate from the finances of the business. A limited company can also be beneficial because of its legal structure and tax efficiency. As well as being ideal for business owners, a limited company is also a great set up for both freelancers and contractors too.
A limited company must have a unique name.
If you have an excellent idea for a business name and find that it has already been taken, you will have to select another. Similarly, if your name is too similar to another that is registered, then you may be asked to change it. To check if your name is already in use, search the Companies House register.
It is worth mentioning that your name must usually end in ‘Ltd’ or ‘Limited’. You can also choose ‘Cyfyngedig’ or ‘Cyf’ if you choose the register your company in Wales. You can avoid using ‘limited’ in your name by being limited by guarantee or by being a registered charity.
Your company name must also not contain sensitive or offensive words; it can also not share a government or local authority connection unless you receive permission to do so.
Tip: When choosing a company name, it is worth looking for available domain names on the web too so that you can match your company name to your website address.
A UK company formation must have at least one director (over the age of 16) but can have an unlimited number of directors.
The directors are responsible for running the company regarding legal requirements such as reporting and paying company accounts. The names and addresses of directors are available to the public through Companies House. However, if you or your family are at risk, you can be removed from the register.
You can also appoint a company secretary with a UK company formation. They must not be an auditor for the company or declared ‘undischarged bankrupt’ unless they have permission. It is not, however, a requirement to have a company secretary.
When setting up a UK company registration, you will also need to decide on shares for shareholders. Your UK company formation must have at least one shareholder, such as the sole director who will own 100% of the company. You will need to issue and class the shares and shareholders and set clear information regarding their rights through ‘prescribed particulars’.
Tip: The director of a company has many responsibilities, including filing and paying taxes as well as registering and completing a Self-Assessment. Make sure you are fully aware of your duties as a director before agreeing.
For all official communication in relation to your business, you need a registered office.
Companies House requires this registered office to be a physical address in the UK. The office also needs to be in the same country that you have registered your company in. A business registered in Scotland must have a Scottish registered office.
The address will be available on the Companies House register and will be available for the public to see.
Tip: You can choose your registered office to be a workplace, home or the address of the person who will manage your taxes, such as your accountant.
To register the company, you need a ‘memorandum of association’ this cannot be updated once the company has been registered, so needs to be completed carefully. You will need to have signatures from all initial shareholders agreeing to form the company.
As well as signatures, you will also need instructions on the roles and responsibilities of the directors, shareholders and company secretary. This is known as the ‘articles of association’.
Tip: There are templates available for your memorandum. However, some choose to create their own. If you decide this route, remember that you cannot register your company online.
Once you have completed the first four steps, you are ready to register the company.
This can be achieved online via Companies House for £12, or if needed, by post using a registration form for £40. Alternative ways to register your company include asking your accountant to do so or using an incorporation service who will handle registration for a competitive price which is usually under £100 for a range of registration services.
Online registration will usually occur within 24 hours. If you want the same day service via post, you will need to pay £100 and mark the envelope with ‘same day service’. Remember you may need to be quick, especially if you think there may be competition for your company name.
Once registered, you will receive a certificate of incorporation which will include your company number.
Tip: If your business is based overseas, you need to register as an overseas company which is slightly different. However, an agent, UK Trade and Investment, or an incorporation service will be able to help you.
Once your company has been formed, you will need to register for Corporation Tax. As a director, you will also need to register for Self-Assessment. As well as this you will need to register for PAYE if appropriate and inform the authorities (HMRC) about employees if this is applicable.