How to register a new company?

How to register a new company?

 

How to register a new company?

 

Note: This guide describes the process of UK limited company registration.

 

The countless number of companies are being registered globally every year. In the United Kingdom in the 12 months to the end of March 2017, there were 644,750 company registrations.

Registering as a company in the UK has never been so easy.

No paperwork, long waiting times or expensive fees.

There is no need for an accountant or lawyer for registering a company nowadays. Everybody (absolutely everyone in the world) can go online and register a UK limited company electronically in about 3 hours.

As company registration process is now super fast and simple, more and more people every day decide to incorporate.

The most popular corporate body in the UK is a private limited company. Since 2007, private limited companies have consistently accounted for over 96% of all corporate body types.

The major reason for this is that the Ltd perfectly meets the initial needs that new small and medium size businesses usually have. Limited companies provide protection to shareholders. They also provide access to all essential legal rights.

In this guide, we will walk you through the necessary steps for setting up a limited company in the UK. Moreover, we will describe every part of company registration process in detail. If you want to start your business journey with forming a UK company read on and see how quick and easy this can be.

 

Basically, in order to register a UK limited company you need the following:

  • An appropriate company name
  • UK address for the company
  • At least one director
  • At least one shareholder
  • SIC code (Standard industrial classification of economic activities) – this identifies what your company does

 

Let’s take a closer look at each step:

 

1. Do you need to register a company?

 

The mere fact that you run a business does not mean that you must form a company.

Depending on the circumstances operating as a sole trader can be a good option to the certain extent. However, there are specific differences between a limited company and sole trader that matter.

Usually, as your business grows you inevitably reach the point where you need to switch from sole trader to the limited company. Limited company registration, in this case, can be slightly different. You can read about the exact procedure in our previous article.

 

Related: How to Change from Sole Trader to Limited Company?

 

However, everything depends on your current position. If you feel like a limited company is the best option for you then it is a good idea to go ahead and register with Companies House.

2. Choose your company name

 

You need a unique name for your new UK limited company. This must be a name that has not been yet registered for another company.

However, this is not the only requirement for company names in the UK. For the successful company registration with Companies House, your new company name must meet specific requirements. Most of these requirements are generic, but it is a good thing to know them in advance. We suggest checking the full details of the acceptable company names before you start the company registration process.

 

Related: What Names Are Acceptable for UK Limited Companies?

 

On top of that, remember that a good company name is an invaluable asset. The great company name will always help you along the way.

 

Related: How to choose a great company name? (ranking table included)

 

As soon as you find the suitable company name you can check if it is available using our company name checker. This tool is harmonized with the Company House records and functions in real time. If your company name is available you can proceed and start forming your company right away.

Remember that you can use a different name for trading. Your trading name (also called business name) can be different from your registered company name.

Additionally, you need to take into account that you’ll need to register your trading name (business name) as a trade mark if you want to stop people from trading under your business name. You also can’t use another company’s trademark as your business name.

3. Company address

 

All UK companies must have an address in the UK. This is a mandatory requirement. You must provide the company address during the incorporation process. You need the company address for official communications, for example, letters from Companies House.

 

Below are the requirements for a UK company address:

  • It must be a physical existing address in the UK;
  • It must be in a country where you want to register a new company e.g. company registered in Scotland must have an address in Scotland;
  • You can use PO Box. However, you still need to provide a physical address and postcode.

 

If you want so, you can use your home address or even the address of the person who will be managing your Corporation Tax.

Remember, that your company address will be publicly available on the online register.

If you do not have an address in the UK or want to keep your home address private you can get UK address online here.

4. Appoint directors (and company secretaries)

 

UK limited companies must have minimum one director. Directors are legally bound to carry the load of running the company and ensuring company accounts/reports are accurately prepared.

The minimum allowed age for directors is 16. The director must not be disqualified.

Legal entity (another company) can be a director of UK limited company, but at least one of the company’s directors must be a person.

There is no requirement for directors to live in the UK (although companies still must have a UK registered office address).

Please note that directors’ names and addresses are also publicly available.

As for the company secretaries, there is no requirement to appoint them for a private limited company. But some companies appoint them to carry on some of the director’s responsibilities.

Even if there is an appointed company secretary, the directors are still legally responsible for the company.

If you register a company with us you can appoint the company director electronically during the company registration process.

5. Shares and Shareholders

 

Limited companies are usually limited by shares.

Shareholders hold the company shares and this allows them to control the company. The liability of each shareholder is limited to his/her shares in the company. This is exactly the way shares limit the responsibility of shareholders.

At least one shareholder must hold shares in the company limited by shares. This can be a director.

If there is only one shareholder, then he/she owns 100% of the company.

As for the maximum number of shareholders, there is no such limit currently in place.

You need to set the price of an individual share which can be any amount. There is no minimum share amount requirement for UK limited companies. Share amounts can be as low as £1 (by the way this is a popular choice and in most cases the reasonable amount to limit the shareholders’ liability).

During company registration process the information about the shares has to be provided. This is also known as “statement of capital”. The following information must be provided:

  • the number of shares, their types and value – known as the company’s ‘share capital’;
  • Shareholders (also known as ‘subscribers’ or ‘members’) details – their names and addresses.

 

You also need to set the class for shares. The class of the share defines the rights it gives to the shareholder. This is known as “prescribed particulars” and must specify:

  • the share of dividends it gets
  • share exchange (‘redeem’) details
  • vote details

6. Find your SIC code

 

Check what your SIC code is. SIC (Standard Industrial Classification of Economic Activities) code identifies what your company does. You can find the appropriate SIC code in the condensed version of the full list of codes provided by Companies House.

7. Memorandum and Articles of Association

 

Memorandum of association is a legal statement signed by all initial shareholders expressing their consent to register the company.

Articles of association are rules governing the process of running and operating the company. These rules are presented in a written form and agreed by the directors, the company secretary, and shareholders.

Both documents must be provided in order to register a limited company.

Usually, there is no need to draft these documents in a standard case. There is a memorandum of association template and model articles available for an immediate use. If you register your company with Mill you’ll have all these ready in our system for you. You can also draft your own articles of association, but if you do so you won’t be able to form your company online.

8. File the incorporation with Companies House

 

Once you have everything ready you can start the company registration process. This can be done in different ways:

  • You can register a new company online with Companies House. In this case, you must register a company that is limited by shares and uses standard articles of association.
  • You can register by post. This application takes between 8 to 10 days. There is also an option to register the company on the same day if you get your application to Companies House by 3 pm and pay £100. In this case, you must mark the envelope as “same day service” in the top left-hand corner.
  • You can register a new company online with us. This is the easiest option. You will get everything set up for you in our system and will be able to get your company registered with Companies House in just 3 hours (in most cases).

 

How much does it cost to set up a limited company?

The company registration cost depends on the method you choose:

  • Online company registration fee with Companies House is £12;
  • Company registration by post with Companies House costs £40 (You can pay this fee by cheque made out to Companies House);
  • Registering a company through our system costs £29 (Companies House fee is included).

 

9. Register for Corporation Tax

 

Once you have completed the company registration process you will receive the official “certificate of registration” (certificate of incorporation). This document is the proof that your company legally exists. It contains your official company number and date of incorporation.

After you company has been registered and is ready to trade you can register for corporation tax within 3 months of starting to do business. Starting to do business also includes buying, selling, advertising, renting a property and employing people. If you doubt whether you have started to do business or not you may consult this comprehensive resource to determine your position.

You can register for corporation tax online with HMRC.

10. Start trading with your newly registered company

 

Once you complete all mentioned steps you will have an officially registered UK company that is ready to trade.

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Changing From Sole Trader to Limited Company

Changing From Sole Trader to Limited Company

Thinking of Changing From Sole Trader to Limited Company?

 

If you are running your business as a sole trader at some point you may start thinking of changing from Sole Trader to Limited Company.

This is quite common practice. Many businesses start with carrying on their business activities as sole traders. Then some of them change from sole trader to limited company.

This shift usually occurs when a business outgrows the sole trader business structure.

There may be certain reasons for you to think about changing your business structure. They may and may not be sufficient to actually start the process.

Thus, when deciding on such important things as changing the legal structure every business owner must lean on solid facts only and not his personal perceptions. Your ultimate purpose is to derive the greatest benefit for your business from every change you make.

 

Below are the most common reasons to change from Sole Trader to Limited Company:

 

  • Limited Company Formation Process is quick and affordable. Usually you get your new company up and running in 3 hours only.
  • Limited Company structure can help you to save tax.
  • Limited Company is a separate legal entity. It limits the liability of shareholders and directors. This means that your liability as a shareholder for any debts incurred by the company is limited to your shares in that company. Your personal assets cannot be seized to pay company debts.
  • Being a company positively impacts your image in the eyes of your customers, suppliers, partners and basically everyone else. People tend to have more faith in a business if it is a registered company.
  • Legal and financial mechanisms are easily accessible for Limited Companies to get investment and raise capital.
  • It is far easier to expand your business being a company rather than being a sole trader.
  • Your business name will be automatically registered together with your company.

 

Important things to keep in mind:

 

  • You and your limited company are not the same thing/person from a legal perspective.
  • You’ll need to open a new bank account for your limited company.
  • Limited company means more paperwork (but that shouldn’t be a problem as long as you are going big, right?).
  • Company funds are not considered to be your own funds unless they’ve been paid to you in the form of dividends.
  • If you will appoint yourself as a company director you will have certain legal duties to fulfil. For example, you will have to manage your company’s resources and finances.
  • Limited company records (e.g. registered address, directors, etc.) are in the public domain and available for everyone to see. This means less privacy for you.

Obviously, there are some pros and cons of changing from Sole Trader to Limited Company. The good news is that they are pretty straightforward.

In essence, the most important differences are: limited liability (this is actually the nature of Limited Company – the reason why this legal structure actually exists. With a limited company you have a limited liability protection) and access to investment/capital raising mechanisms.

If these reasons coincide with your situation, then you can start with the changing process.

 

Changing from Sole Trader to Limited Company – the step-by-step process:

 

Step 1: Form your limited company

Step 2: Notify HMRC that you have stopped self-employment as a sole trader. (You may use this link for that).

Step 3: If you are registered for VAT, you must notify HMRC within 30 days of the change. Otherwise, you will get a penalty. You can either cancel your VAT and then register a new one or transfer your current VAT registration. You can complete this step using this link or fill in and send this form to HMRC by ordinary post.

Step 4: In case you employ people, you will also need to notify HMRC about the change.

Step 5: Complete your final tax returns as a sole trader.

Step 6: Within 3 months of starting to trade through your company, you must register with HMRC for Corporation Tax. You can do this online.

Step 7: Inform all of your existing customers, suppliers, lenders, service providers and employees that you are going to start trading as a limited company.

Step 8: Update your website, terms and conditions and business stationery with your new details.

Step 9: Leverage the limited company advantages for the benefit of your business (after all you’ve changed from sole trader to a limited company for a good reason, right?).

 

Notes:

This article outlines the process of changing from Sole Trader to Limited Company in the UK. However, this is almost the same or very similar in other countries including Ireland and U.S.
** This article does not constitute a legal or accounting advice and is provided for general information purposes only. For a qualified advice please refer to the certified lawyer or accountant.

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