Formation of a company
As of January 2019, there were 5.8 million businesses in the UK, with the new year only 3 weeks ahead, this number increased by 3.5% in 2019, which means over 200,000 companies have been set up within a year. Does it help to build up a picture of the intensity of company formation in the UK?
Yet it’s crucial to understand that not all businesses’ needs are the same. Click here to find out if you need to form a company to start your business journey? If you think limited company formation works well for your business here is a guide to steps involved in new company formation.
Once you decide to form a limited company, the first essential is to give your company a name as it will be the sole character of your business, however; choosing a name is no easy task unless you take the elements below into consideration;
- The name cannot be the same or similar to another company`s or trademark registered previously.
- It should end with the word ‘limited’ or ‘ltd.’.
- It must not be offensive.
- It cannot contain a ‘sensitive’ word or expression or suggest a connection with government or local authorities unless there’s a permission to use it. Click here to know which words are termed as ‘sensitive’ and the conditions to use them.
It is pertinent to note that the business/trading name might be different from the company’s registered name and it cannot contain any ‘sensitive’ word or expression, such name also cannot contain the words ‘ltd.’, ’limited’. ’plc.’ etc.
The registered name of the company needs to be displayed at the company`s registered office and at all the places from where it operates except home. Also, the name needs to be appropriately included in all the company’s documents, publicity, letters, website, etc.
Registration of documents
The following documents are required to be submitted to Registrar of Companies for the set up:
- Memorandum of association
- Application for registration of the company
- Other documents
- Statement of compliance
Memorandum of association
A company can be formed under the Companies Act, 2006 only if one or more persons subscribe their names to a memorandum of the association stating that they wish to form a company and subscribe to at least one share each.
Application for registration of a new company
The application for registration of a new company must state the following;
- The company’s proposed name
- Whether the company’s registered office is to be situated in England and Wales (or in Wales), in Scotland or in Northern Ireland
- Whether the liability of the members of the company is to be limited, and if so whether it is to be limited by shares or by guarantee
- Whether the company is to be a private or a public company
- If the application is submitted by an agent, then his name and address.
There are few other documents required to be accompanied by the application for registration as follows:
- Statement of capital and initial holdings, for a company limited by shares
- Statement of guarantee, for a company limited by guarantee
- Statement of the company’s proposed officers i.e. director, secretary
- Statement of the intended registered office of the company
- A copy of the proposed articles of the company
Statement of compliance
It is a statement that indicates the requirements of Companies Act, 2006 with regards to registration have been complied with.
Registration and issue of a certificate of incorporation
The registrar rosters the submitted documents if it is satisfied that all the requirements of the registration, have been complied with. Upon registration, the ROC shall issue a certificate of incorporation to the company. This certificate is conclusive evidence that all the requirements of registration have been complied with and the company is duly registered under the Companies Act, 2006.
SIC code is a 5 digit standard industrial classification code. The requirement to supply SIC code at the time of incorporation was introduced on 30th June 2016. When a company registers at Companies House it needs to provide at least one SIC code that describes its business, even if it’s dormant.
The minimum requirement of the number of directors is at least 2 in public companies, whereas in privates one person can also be registered as a director. There should be at least one director who is a natural person. The director of a company is responsible for running and carrying out the administration tasks of the company.
To be a director of the company, the following conditions need to be met:
- The person should be over 16 years of age
- Should not be disqualified to be a director
A public limited company needs to appoint a company secretary while private companies have no such obligation by law. Anyone can be appointed as the secretary unless they are:
- The company’s auditor
- An ‘undischarged bankrupt’- unless they have permission from the court.
Once a company is incorporated, Companies House informs HMRC about the same. The company then receives a letter from HMRC at its registered office which contains the company’s Unique Taxpayer Reference. This number helps HMRC to identify what companies owe how much tax.
Registration for Corporation tax
The company would be required to sign up for corporation tax within 3 months from the date it starts trading.
Other registrations required
Registration for PAYE: If the company has employees then it needs to register for PAYE
Registration for VAT: If the company’s annual turnover is assumed to be more than £85,000 (2018-19 VAT registration threshold), then the company can voluntarily register for VAT.
Still, need help?
Still can’t make heads or tails of the company formation procedure? Reach out to us, our team would love to assist you in forming your company. Could you believe we could manage to put all things in place and make your company live in just 1 day? Yes! You read that right.