Start Up Tips – Forming A New Company

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Here’s a full lowdown on setting up a Private Company Limited by Shares 

Introduction

The formation and operation of a private company limited by shares is highly regulated under the Companies Act 2006. Companies must be registered with Companies House and HM Revenue & Customs (HMRC) and they are subject to a variety of rules requiring them to report annually to both Companies House and HMRC.

What is a private company limited by shares?

A private company limited by shares (usually known as a ‘limited company’), has a separate legal identity to that of its owners, unlike a business run by a sole trader or a partnership. A company can own property and other assets in its own right, as well as sue and be sued.

The owners of a company limited by shares are called ‘members’ or ‘shareholders’ and benefit from limited liability, so that if the company is wound up the shareholders will lose the value of their investment in the shares, but their personal assets will be protected. Directors, who may or may not be shareholders, are appointed to manage the company.

Shares in private limited companies cannot be publicly traded. They are usually held by directors, employees, other companies, family members or other investors. Any profit made is owned by the company and, after payment of corporation tax (and depending on its precise legal structure), the company can either share out the profits or retain them for re-investment in the business.

Restrictions on company names

It is not possible to register a company with the same name as another company (or one that is too similar). To find out whether a name has already been registered by another company, go to the ‘company name availability checker’ provided by Companies House at https://find-and-update.company-information.service.gov.uk/company-name-availability

Certain words can only be used with permission from a relevant authority, and names that may cause offence are not permitted. For more information, and to check which words require permission, go to www.gov.uk/government/publications/incorporation-and-names.

How to register a company with Companies House

A limited company must be registered with Companies House before it can start to trade. This process is also known as ‘incorporation’. Companies can be registered with Companies House online at www.gov.uk/limited-company-formation/register-your-company.

The information and documents that must be supplied when registering a company include the following:

  • The company’s name.
  • Details of the company’s directors.
  • Details of ‘people with significant control’ over the company.
  • A registered office address where official communications can be sent, that will be publicly available on the companies register. This must be a physical address in the same country in which the company is being registered (for example a company registered in Scotland must have its registered address in Scotland too).
  • A memorandum of association, which demonstrates the agreement of all the shareholders (known as the initial ‘subscribers’) to the formation of the company. Templates for a memorandum are available at gov.uk/government/collections/memorandum-of-association-templates-for-limited-companies.
  • Articles of association (which set out the rules about how the company will operate and the powers of the directors), unless the company will be using ‘model’ articles, which apply to the company by default if no other articles are supplied when registering. For more information about model articles, go to gov.uk/model-articles-of-association-for-limited-companies.
  • A statement of capital that includes the names and addresses of all the shareholders and the number and type of shares the company has issued (known as its share capital).

The fee for online registration is £12 and online applications are usually registered within 24 hours.

A company can also be registered by post, using form IN01. However, the fee in this case is £40 and postal applications are usually registered within eight to ten days. A same-day service is available for applications that are received at Companies House before 3pm and the fee for this is £100.

Registering for corporation tax

Companies that register with Companies House using the online service at www.gov.uk/limited-company-formation/register-your-company can register with HMRC for corporation tax at the same time. 

HASL also provides help to client partners to help ensure their tax affairs for their limited company are sorted. Please get in touch with us. 

Statutory reporting requirements

Company directors are legally responsible for ensuring that the company meets all its legal reporting obligations. These responsibilities include:

  • Preparing financial statements.
  • Maintaining statutory books and registers, such as the register of people with significant control over the company (the PSC Register), and informing Companies House of any changes.
  • Filing an annual confirmation statement (which has replaced the annual return).
  • Keeping accounting records.

Directors are responsible for the submission of statutory documents to Companies House and must provide notice of changes in the company’s structure and board of directors. In particular, they are held personally responsible for the submission of accounts, with late filing resulting in a fine.

HASL services help client partners  ensure compliance

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