What is Company Formation?
Company formation is the term used to describe the process of company registration in a particular jurisdiction. It has the same meaning as company incorporation, company registration or business registration. UK company formation legal framework was reviewed by the Companies Act 2006. After company formation, a company is actually a person with an identity that is separate from the companies’ owners or officers. Company registration is like obtaining a business license; it establishes a business structure that is qualified to organise and run a business. Company formations are used for running profit and non profit organisations.
Who Can Benefit from Forming a Company?
UK company formation is available for persons or groups of people who, generally, want to engage in profit making activities, under a legal framework for management and organisation of the ltd company. Also, if you want to derive tax advantage then ltd company formations are worth considering. And, with limited company formation, the owner can operate a business knowing that they are operating a legitimate business.
Why Form a Company in UK?
There are many advantages of UK company formations, but generally our clients give us the following reasons for ltd company formations:
- The company functions as a separate entity after company incorporation.
- Protects personal assets after company registrations; assets are ring fenced against potential legal claims. This means that the shareholders/owners will not lose more than they have invested/guaranteed; they are not personally responsible for the debts and obligations of the company in the event that these are not fulfilled.
- UK ltd company formation provides continuation/resilience regardless of death, resignation or bankruptcy of shareholders or the directors or the employees. The life of the company continues uninterrupted until the decision to dissolve the company is made by the directors and shareholders.
- Allows transferable ownership — UK ltd company formation allows transfer of interest/shares from one person to another. While transferability of shares is standard, specific conditions regarding the transfer of shares can be written into the Articles during the limited company formation process for more control.
- Enables to distribute profits (through dividends) when it suits, rather than every tax year. Therefore, limited company formation can help with the managing tax payments (cash flows).
- Produces an impression of credibility compared to a sole trader. The company registration helps to verify legitimacy for both customers and suppliers.
- After company incorporation, there is no requirement to start trading.
Company Formation – Choosing a Business Structure
The structure of your business can influence your company in the future. We allow the flexibility of standard and tailor-made company formation process; you choose the products that suit your specific business requirements. Under the Companies Act there are three types of UK company formations: Public limited company (plc), Private company limited by shares (Ltd, Limited) Limited Liability Partnership (LLP). The most popular is to form a ltd company.
UK Company Formation Process
There are three ways to complete company incorporation. In order of popularity, they are:
- Using company formation agents (generally web based services). This is the most affordable and fastest way for company registration. UK limited company formation is completed the same day.
- Through a solicitor or accountant. This is the most expensive course to company formation yet reliable. Not the fastest approach.
- Filing personally with Companies House (paper filing), cheapest but lengthiest process.
The Role of Company Formation Agents
Our role is to provide a seamless service where UK residents can get speedy, low cost ltd company formation. Our products and services do not end with limited company formation; in fact we make sure we cover all the aspects of company registration. This includes the UK company formation, registered office address, company secretary, bookkeeping and accounting, fast track bank, mail services, trademark registration, VAT and PAYE set up, and more.
Company Registration – Choosing a Name
Companies House will reject certain company names on the following grounds:
- Suggesting government affiliation
Be careful when using sensitive words, you may have to provide justification for their use.
Company Incorporation — What’s Needed?
Shareholding details – the number and value of shares. A minimum of one issued share is required, but you can cause to strengthen a balance sheet of the company by issuing a substantial number of shares. Shares may be issued in joint names, and can be issued to resident and non resident individuals, companies, trust or partnerships. Remember, shareholders names and addresses happen to be public information.
Directors – a minimum of one director is required for ltd company formation. Most companies have two – this tends to protect the company’s interest. Directors have a list of general and specific statutory duties: fiduciary, management, compliance, employment, constitutional and contractual duties.
Three addresses will be required when you are forming a ltd company – a registered office, a residential and a service address.
UK ltd company formation no longer requires a company secretary, but we do recommend one. If you do not appoint a company secretary at the time of company formation, the directors have to carry out the duties of the company secretary on their own.
What are the Main Company Formation Documents?
All our UK company formations packages will have the following main company formation documents: a Certificate of Incorporation, a Memorandum and Articles of Association and a Company Register.
Company Formations Statistics
The active register in the UK in March 2012 stood at 2,455m companies. Last year (2010/11) new company formations amounted to circa 401,000 (2009/10 362,000 legal entities), including LLP and PLC in England and Wales (as well as Scotland and NI). 90% of the legal agencies were incorporated through company formation agents.