If you have decided that entrepreneurship is the way to go, it is a wise decision. But you need to choose the type of business you want to run. You are free to run a sole proprietorship, a partnership or form a limited company. Supposing you choose to form a limited company? Well, it is a good decision. But the trouble is that in the UK, there is a criterion you must follow to successfully form a limited company. This is where Hammersmith Chartered Accountants come in. We will help you form a limited company.
If you need a company formation Hammersmith Chartered Accountants can offer this service without charge to you. Call our office now and include the phone number.
Types of limited companies
Of course, you must decide which form of a limited company you need to form. You may choose to form a company limited by shares, or one that is limited by guarantee. Now before we move to the nitty-gritty of how you can form the company, let us look at what a limited company is:
It is a company limited by shares or guarantee. It is the most common and popular company formation in the world. In the UK, the company can be registered in Northern Ireland, Scotland, Wales and England.
A company limited by share
It is a profit-making company that is a legal entity. It means that the company is separate from people that form and run it. The company is owned by shareholders who appoints directors to run it. But its finances are separated from those of people that own or run it. When the company makes a profit, it needs to pay taxes. It can then distribute part of the profit to the shareholders. It also keeps some of the profits to finance its activities.
A company limited by guarantee
This is a company that is usually not intended to make profits. But just like a company limited by shares, it is a legal entity separate from people that run it. It also has separate finances from those of the people that run or own it. However, the company must have guarantors. Such people guarantee it with a specified sum of money. Most of the profits the company makes are ploughed back into its activities.
Incorporating a Limited Company
Step 1: make up your mind
You will need to decide whether you want to form a limited company or any other form of business. If you choose a limited company, it must be incorporated. In the UK, the incorporation of all companies is done via the Company House. You will need to pay a filing fee and go through the following steps.
1. Choose the company name
The first obvious thing that you need to do is to choose the company name. There are rules that govern this process. The most important one is that the name should not be the same as that of another registered company. If it is similar, to the name or a trademark of another company it will not be incorporated. Thus, you will need to make changes if a complaint is instituted. Also, the name of the company must end with the word Limited or abbreviation Ltd.
It is essential to note that other than choosing a unique name, it should also not be offensive. Besides, the name cannot contain sensitive expressions. It must be devoid of words that connect it to your local authority or government.
Step 3 :
So far so good. Once you have chosen a suitable name, the next obvious thing you will need to do is to appoint the company directors or a secretary. Appointing a director is mandatory but appointing the company secretary is optional.
· The appointed director will be responsible for:
· Managing the finances of the company
· Reporting changes that have taken place in the company
· Confirmation of statements and filing annual returns
· Ensuring that the company’s accounts are in place and updated.
The director may hire other people to help but they are responsible for the company’s records. They must also follow the rules as spelled out in the article of association.
Note that a limited company should have a minimum of one director responsible for the day to day running of the company. They need to make sure that the company’s reports and accounts are properly prepared. They must also be accurately reported. Note that the director should be over 16 years and should have a registered office address in the UK. Also, their name and any other personal information must be availed. Such details will be accessed by the public at the Companies House. They must also avail a service address that can be made public. However, if they give their home address, they may request the Company House to expunge the address from the register.
A private company is not obligated to have a company secretary. But some companies may choose to have one. In such a case, the company secretary takes over the responsibilities of the director. But this does not absolve the director from the primary legal responsibility.
Chose shareholders or guarantor
At this stage, the company must have at least one guarantor or shareholder. Depending on the type of a limited company you have decided to form, you will need to choose one guarantor or shareholder. The shareholder may also double as a guarantor. It is important that you decide whether you will set a guaranteed amount or issue shares. Also, you need to name the people who will have significant control of the company. They are referred to as people with significant control (PSC).
Preparation of documents that show how you will run the company
The memorandum of association
It is a statement signed by all the guarantors or initial shareholders. It shows that they have agreed to form a company. This document must be presented when seeking registration. It is a legal document that shows how the shareholders will relate.
Article of association
It is another vital document that must be prepared. It explains the rules that will be used to run the company. The rules must be agreed by the shareholders, company secretary, directors, and guarantors.
Check the records
The Companies House may decline to register your company if they feel that your records are not in order. Ensure the memorandum of association is updated before seeking registration. Notice that it cannot be updated after registration has been done
Article of association- you can use the standard article or write one. It will then be forwarded to the Companies House.
Important records – you need to keep the following records:
- About the company and its finances.
- Shareholders, directors and company secretary if there is.
- Records on the results of shareholders resolution and votes
- All promises by the company to repay debts at a specified future date and the persons to be paid
- Any promises the company makes to repay loans
- Records on transactions when a new investor buys the company’s shares
- Loans and mortgages that have been secured against the assets of the company
- Information on where you keep the records if not the registered office.
· The register showing individuals with significant control must be kept. The register must include any details of any PSC with 25 % shares and their voting rights. Such people can appoint and remove a director. Also, they can influence the trust or control of the company. However, if the company does not have people with such influence, you may still need to provide the record.
If the company is already operating, the following accounting records must be kept:
- The money received and expended
- The debts the company owes
- Details of assets the company has acquired and owns
- Records of goods that the company buys and sells
- Any other document HMRC may need including a bank statement.
Note that HMRC is likely to be fine the company about £3,000 if the records are not kept.
This is a vital step because it gives your company the ok to engage in the type of business you have chosen. The registration is done at the Companies house. You will need to have the official address registered before you get a code that will identify what your business is doing. Ensure you check and adhere to the address rules before seeking registration. You have the option to choose to register with corporation tax later. You can also register for it at the time you are seeking registration with Companies House. Alternatively, you may register your company with the Companies House upon which you will receive a certificate of incorporation.
To register with Companies house, submit information containing details of the shareholders and yourself. The most important details include:
- Where you were born (Town)
- Your father’s first name
- Your National Insurance number
- The maiden name of your mother
- Your telephone number
- Passport number
Notice that you are required to pay £12 to the HMRC to have your company registered. Also, you may choose to register it online by creating a gateway user ID (government). You may also chose to have it registered by post or do so through an agent. The good news is that Hammersmith Chartered Accountants will do this for you free of charge.