Company Formation FAQ's:

Company Formation Answers

1. What is Company Formation?

   Company Formation is essentially the process of registering a business as a limited company within the borders of the UK. In order to start a limited company an individual needs to register with Companies House and abide by the rules laid down by the Companies Act 2006.

2. What are the advantages of starting a limited company instead of another sort of business?

   What are the advantages of starting a limited company instead of another sort of business?

   • Limited financial liability

   • Tax efficiency & advantages

   • Ownership and control

   • Business security

    

   These benefits are not available with any other form of business and make a limited company the most appealing sort of business within the UK. For more information, see our blog article on the Advantages and Disadvantages of a Limited Company.

3. What sort of company is registered with a company formation?

   The most common type of company registered is a company limited by shares. This is the most regular type of limited company formed by business owners within the UK. But there are other types which may be formed for more specialist reasons.

   • Company Limited By Shares – A separate legal entity from the business owner. Has one or more directors/owners who are issued with shares in the company. Established and run to make a profit with profits being distributed to the owners in the form of dividends. The most common form of limited company and the business you will start with a Company Formation.

   • Company Limited By Guarantee – A form of limited company similar to a company limited by shares, does not have shareholders, but instead, its members act as 'guarantors' who agree to contribute a set amount of money on the winding up of the Company. This form of limited company is often used for non-profit reasons as it does not need to involve profit orientated business activities. There is no payment of dividends and it can be set up to form a charity. You can still carry out a Company Formation to form a Company Limited By Guarantee but it requires slightly different company articles (Memorandum & Articles of Association) and is registered with Companies House in a different way.

   • Public Limited Company - is quite simply a limited company which is allowed to offer shares for sale to the public. This means that it can derive extra funds where it needs them by selling more shares and diluting ownership. Before a public limited company can begin trading it must show that it has issued at least £50,000 worth of shares. Registration of a public limited company also requires a minimum of 2 directors but otherwise is carried out in much the same way as any other Company Formation.

    

4. Who can carry out a Company Formation?

   Anyone aged 16 years of age or older (Section 157 Companies Act 2006) can register a limited company via the company formation process. According to Section 154 of the Companies Act 2006 - A company limited by shares requires at least one (human) director but there may be more and it is possible for a limited company to be director of another limited company, as long as there is at least one human being who is already a director.

   There is no longer a requirement to have a company secretary (Section 270 The Companies Act 2006) but you may choose to do so if you wish.

5. What does it mean to be a company director?

   A company director is in charge of the day-to-day running and management of the limited company. In most cases, at the time of company formation, they will be both the owner and manager of the company. A director has a legal responsibility to act in the best interests of the company at all times. A director of a company is also seen as an employee of that company and as such a Director Service Contract should be in place to cover all the rights/obligations and powers of the director.

6. Who should act as the company secretary?

   Anybody may act as the Company Secretary of a private limited company. A person may consent to act as both the Company Secretary and be a Director of the same limited company. Section 270 of the Companies Act 2006 means there is no legal requirement to have a company secretary but if you do choose to have one, they must be included on the register. If you wish to have a company secretary, you can add one when carrying out a company formation.

7. How can I register my limited company?

   To register a new limited company through the company formation process you can either carry out the registration yourself directly with Companies House or use a Company Formation agent like ourselves to help you with the process. As a company formation agent we know how to help you get your company registered as quickly and efficiently as possible.

8. What do I need to do to register my company?

   In order to complete a company formation you need:

   • At least 1 director (at least 16 years old)

   • At least 1 shareholder (for most new companies the director and shareholder are the same person)

   • An available company name – use our company name search tool to ensure your company name is available before getting started

   • Companies House Form IN01

   • Memorandum of Association

   • Articles of Association

   • Time & money

    

9. Can't I complete a company formation more cheaply myself?

   No. It is actually cheaper and quicker to use our company formation service to register your limited company. If you don't believe us, read this article DIY vs Company Formation Agent. Plus you get the benefit of more experience and knowledge to ensure that your company formation runs as smoothly as possible.

10. What are the memorandum and articles of association?

    The memorandum and articles of association are legal documents that set out:

    1. The Company Name
    2. The Registered Office location and
    3. The internal constitution of the company

    You will probably be asked for this document when you open a bank account for your company. All our companies are incorporated using standard 'general commercial company' memorandum and articles. These are written in a way that is designed to enable your company to carry out any business activity and to minimise the administrative requirements on the company. Our company formation service includes the drafting of these essential company documents to ensure proper registration with Companies House.

11. What is the certificate of incorporation?

    The certificate of incorporation is the document issued to confirm that Companies House has incorporated your company name and states the date of incorporation and the company number. This should be printed on 160gm ivory card.

12. How long does company formation take?

    Using our company formation service generally means your limited company will be registered with Companies House within a matter of hours. As long as you place your order during business hours the registration process usually takes around 2 – 5 working hours in over 95% of cases. We have registered companies in as little time as 25 minutes, but during peak times with the Registrar it may take longer.

13. Is there any paperwork to fill out?

    Using our online company formation service means there is no paperwork to fill out and sign. Instead you fill out a few simple online forms and we do the rest. For security reasons and to form a type of online signature we need 3 details of person information:

    • Mother's maiden name

    • Town of birth

    • Eye colour

     

14. Can I choose any name for my company?

    Yes, you can choose any name you like as long as it is not already registered, 'same as' or 'too like' an existing company name or likely to cause offence. Some words in company names are however restricted or forbidden, these are called 'sensitive words'. Due to changes made in the Companies Act 2006 words added to company names that might once have been sufficient to differentiate them from an already registered name and thus make them registerable are no longer deemed as such. These include words like 'services' and 'UK'. You can register a name which includes sensitive words as long as it is approved by the secretary of state. For more information on sensitive words and guidance on choosing a company name, please see the relevant pages on our site. Our company name change page might also be relevant.

    Remember that you must include the word "limited" or the letters "Ltd" as part of your company name when carrying out a company formation.

    To cover yourself fully, you should also check that your name, or part of your name has not been registered as a Trademark by somebody else.

15. How should I allocate shares in my company?

    By law there must be at least one shareholder who subscribes to take at least one share. If you wish to take an equal amount of shares with another member of the company then it is usual to take one share each. Authorised share capital has now been abolished by The Companies Act 2006, so allocation of shares is now carried out slightly differently. If you choose the amount of shares to be issued by the company then the following are examples of how to distribute the shares.

    • Mr Smith wants to own 100% of the issued shares in Company X Limited. Mr Smith would take 1 share or whatever the total number is issued (if 100 were issued, he will take 100).

    • Mr Smith and Miss Jones want to own 50% each of the issued shares of Company X Limited. Mr Smith will take 1 share, Miss Jones will take 1 share (if 100 shares were issued, they would have 50 each).

    • Mr Smith wants to own 80% and Miss Jones 20% of the issued shares of Company X Limited. Mr Smith will take 8 shares, Miss Jones will take 2 shares (if 100 shares were issued it would be 80 and 20 respectively).

     

    If you require advice regarding the shareholding for your limited company please contact our sales team.

16. What is the registered office?

    The registered office must be an address in England and Wales, or Scotland where legal documents can be served on your company. This address is kept on the Companies House database and is available for anybody to inspect free of charge. This address must also be written on all your company correspondence such as letterheads and invoices. It is quite common to use a director or company secretary's home address as the registered office address.

    The Company Warehouse offers a Registered Office address service if you wish to keep your home details separate from your company details. There is a small annual fee for this service that includes forwarding up to 10 items of statutory and legal mail each year.

17. What is a director's service address?

    In an effort to protect director's personal details, the Companies Act 2006 introduced a 'service address' for directors. Directors will now have a service address and their residential address. Only the service address will be made public. The residential address is viewable by public authorities and credit agencies, but no one else. This allows some protection for the director. It is possible to use the companies registered office address as the director's service address.

18. I've carried out a company formation with another agent or by myself but now I need to make changes, can you help?

    Quite often people find that the "generic" memorandum and articles of association used to form their limited company are very restrictive can cause problems when they want to take their business in a new direction. We offer company restructuring packages which help you get the most out of your limited company, taking advantage of a number of benefits offered by other limited company structures. For more information, see our article Company Restructuring – Making The Most Of Your Limited Company.

    You might also find that you wish to make other changes to your company such as a company name change or change to the directors of the company. We can help in most cases. Contact our business consultants today to see what we can do to help you on 0800 0828 727.

19. My company has been struck off the register, can I carry out another company formation to get it put back on?

    No. In this instance the best course of action is to complete a company restoration. In most instances we will be able to help you with getting your company back on the register. Contact our company restoration team today for support and guidance on 0800 0828 727.

20. What are the alternatives to Company Formation?

    As an alternative to company formation you may wish to purchase a Vintage Company there are a few reasons for doing so. The benefits of using a vintage company instead of completing a company formation to start a new limited company include:

    • An established name

    • Better credit-worthiness

    • Improved sense of trust-worthiness

    • Previous account submission

     

    For more information see our blog article "What is a Dormant Company?"

21. How can I protect the name I choose for my company?

    Completing a company formation to register your limited company will offer some protection to your business name. Limited companies and limited liability partnerships are the only type of business required to register with Companies House and so they are the only ones protected. Having said that, registering your company name is only the first step. It is still possible for someone to register a trademark using your business or company name – so it is always a good idea to complete a trademark registration to protect your company name more comprehensively and allow you to take legal action if necessary.

    Similarly, registering a domain name is another way to ensure the best possible protection for your business name. Any other person or business would be free to register a domain name using your business name – registering a limited company is not enough to prevent them from doing so. So we recommend using our domain registration service to reserve your company name in website form, even if you have no plans to have a business website now – you might in the future.