Incorporating or forming a company is a straightforward and relatively quick process that can be completed entirely online. The UK is a popular destination for entrepreneurs and investors looking to start a business because of its well-established legal system, stable economy, and favorable business environment. In this article, we will discuss the steps involved in incorporating a company in the UK and provide some tips to ensure a smooth and successful process.
1. Choose your company name
You're starting a business, its a big step, firstly you nee to decide what to call it, if the company name is going to be part of the marketing you may want to think what sounds works for your particular sector, however as most companies are the legal entity which owns the business (which may be trading under a different name), often the company name is not that important. The first step in incorporating a company is to choose a unique company name that is not already in use. You can check the availability of your preferred name on the Companies House website, which is the UK's official register of companies.
2. Decide on the company structure
Next, you will need to decide on the structure of your company. The most common structure for small businesses in the UK is a private limited company (Ltd), which provides limited liability protection to its shareholders. This means that the shareholders' personal assets are protected if the company faces financial difficulties. Other options include partnerships and sole traders, but these structures do not offer limited liability protection.
3. Appoint a director and if required a company secretary
You will need to appoint at least one director and in certain circumstances a company secretary for your new company. The director is responsible for the day-to-day running of the business, while the company secretary is responsible for ensuring that the company complies with its legal compliance obligations. You will need to decide if your have multiple participants in the company on how shares are allotted, for single director companies this is normally 100 shares of unpaid share capital with 100% owned by the director, where others are involved then you may want to have some form of legal arrangement on how shareholdings are determined and the rights of dilution if other future members join.
4. Register your company with Companies House
Forming a company in the UK, needs registration with Companies House, this process is know as company incorporation. This can be done through an online incorporation agent. It is highly advisable to have your company along with any directors/officers registered to a business service address as this ensures that your personal address is never associated with the company or appears on any record. This ensures that your privacy is protected, which later could be important. When you complete company incorporation, you will receive your incorporation certificate along with the Companies's Online Authentication 6 digit code.
5. Register for Corporation Tax with HMRC
Once your company is registered with Companies House, you will need to register for taxes with HM Revenue & Customs (HMRC). This will include registering for Corporation Tax, VAT (if applicable), and PAYE (pay-as-you-earn) if you plan to hire employees. When your register with HMRC, they will provide you with a Unique Tax reference number or UTR. Its important that you keep this number somewhere you can find it. Its also worth setting up your HMRC gateway account and registering for corporation tax well before your company's reporting end date as this can often take 2-6 weeks to complete.
6. Open a business bank account
To keep your personal and business finances separate,when starting a business it is advisable to open a business bank account. This will allow you to receive and make payments, pay suppliers, and manage your cash flow effectively. Often people do not open a business bank account and use their personal account for company transactions, when it comes to the end of the year it can become very hard to differentiate between business and personal outgoings making for a more stressful time when putting their first years accounts together.
7. Comply with legal compliance and filing obligations
As a registered company, you will need to comply with various legal requirements, such as keeping accurate financial records, filing annual accounts and tax returns with HMRC, and holding annual general meetings. It is essential to stay up-to-date with these requirements to avoid penalties and ensure the smooth running of your business. HMRC and Companies house both have their own filing obligations and deadlines as Companies House is only concerned with your companies obligations to the companies act, whilst HMRC are only concerned with the companies taxation affairs.
Summary
In conclusion, incorporating a company is a relatively straightforward process that can be completed entirely online. However, it is essential to follow the steps carefully and comply with all legal requirements to ensure a smooth and successful process. By choosing the right company structure, registering for taxes, opening a business bank account, and complying with legal requirements, forming a company can be a easy process, and put you in a good place to take your new company to the next level.
