Company formation: How to register a company?
Registering a company is not as easy as it sounds. It takes time and effort to form a company. It will be difficult to register a company without the help of an expert in the field. In this article, we will cover what you should do to register your company online, what you need to consider before making the decision, and how to avoid some common mistakes.
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Everyday, new business ideas are cropping up in peoples’ minds and with that also comes the desire and need to incorporate and begin selling goods and services. This is because, except when setting up as a sole trader, a company cannot begin operation until it has been incorporated or registered.
While the majority generally feel like the devil is in the details for incorporating a business and for the well established businesses alone, the truth is it is actually not.
Start-up and small scale companies are emerging and Companies House get to register many and even more than they can handle per day.
In essence, the processes involved in company incorporation or registration may be long but just paying keen attention to the fine print will make you realise you can do it all by yourself, though you may involve the service and expertise of an agent to help if you don’t have the time to commit.
You just need to know the processes and every other thing becomes easy. But first…
What is company formation?
Company formation or incorporation is the process of legally incorporating a business as a limited liability company at the end of which a certificate of incorporation is issued. It is also known as company registration.
At the point when the company registers with the Companies House, the enterprise becomes a separate legal entity from its owners and therefore becomes responsible for its own finances, assets, and liabilities.
This is different from sole trading where the business and its owner are seen as the same.
The process of company formation is generally divided into four parts which are – promotion, incorporation or registration, capital subscription, and commencement of business.
In this article, we will focus more on the processes related to company registration.
How to register a company?
Be aware that sometimes companies registers
- directly online with Companies House (this cost only £12 and can be charged on your debit or credit card),
- by post - download and print the form IN01 (this will cost £40 and it takes about 8 – 10 days to process),
- through an agent, or
- using third-party software.
Regardless of the method you choose to use, you should be familiar with the processes involved in order to make the necessary documents and information available.
As mentioned above, there are also companies in big cities like London, that provide different packages online and register your business for you.
These packages include free digital versions of company certificates that are sent directly to you via email as PDF documents. Additional extras like printed company documents, certificates of good standing, and apostille certificates can be included in your order. These extras attract added fees.
You can also choose to register for Corporation Tax while registering your company. Otherwise, you can do the registration with HMRC after you are done with company registration.
Note that if you prefer to delegate this task of registering your company, there are specific companies that do all the work for you.
The aim of these companies is to ensure that you can concentrate on your core business, rather than wasting time on administrative procedures.
How long does it take to form a company?
It usually takes 5 to 10 minutes to complete your company's application, and then between 3 and 6 hours of work for your company registration to be approved.
Although, depending on Companies House workload of the day, this can take up to 24 hours. It can also depend on the type of company that you are starting up and the size of your operation.
What details are necessary to form a company?
Here is the step-by-step guide and details necessary for registering your own company in London:
1. To start, you have to be sure that setting up a company is right for you. So, find out if you should register as a sole trader, business partnership, overseas company, social enterprise, or an unincorporated company instead. If you are not of these, then you can proceed to step two.
Also, you should know if your company is limited by guarantee or share because you will need the information during the registration online.
2. Next, choose a name under which to register your company.
-First, there are rules guiding company name choosing.
- The name cannot be in use by another company or be similar to that which is in use by another company.
- It must end with Limited or Ltd, or the Welsh version of it, which is Cyfyngedig or Cyf if you are registering in Wales.
- The company name cannot be the same as another name, too much like another name, be offensive, or contain any sensitive word(s)
-Secondly, you will need to make sure that the name you have chosen is not already used by someone else, so you need to do verification first. You can do this online through the service of Companies House register. Simply enter your company name into the name check tool and search. Name search is free. After you have confirmed the validity of your company name, you can proceed to the next step.
3. Choose the directors and or the company secretary. Choosing one or more directors is important but a company secretary is optional.
4. Choose your company’s shareholders or guarantors. You need at least one of either (as applicable) and this person may or may not be a director. Also, choose the people with voting rights over your company (persons with significant control – PSC).
5. Next, prepare your documents of association (the statement of organisation of your company, describing how your company would run) i.e., memorandum and articles of association. You may wish to involve the services of a lawyer in this step for a professional guide.
Know the records you need to keep i.e., the company and account records, minutes of meetings, votes, etc. You should seek the help of an accountant to make sure your company account is rightly balanced. Also know that you need to keep those records for a minimum of 6 years from the end of the last company’s financial year.
6. Register your company! For this, you’ll need
- company addresses which must be a registered physical office address in the country in which your company is.
- a SIC code (Standard Industrial Classification code), the list of which can be obtained from the Companies House website. This code provides Companies house with a description of your company’s nature of business.
- at least three of the following information about you and your guarantors or shareholders
- mother’s maiden name
- national insurance number
- telephone number
- town of birth
- passport number
- father’s first name
After you are done with your registration online and your documents have been verified, Companies House issues you a digital or electronic certificate of incorporation via email within 24 to 48 hours (if you register directly on their website). If you have requested a hardcopy certificate while registering, it will be sent to your registered office address.
Also, know that if your taxable turnover is more than £85,000, you must register for VAT. If you take over a VAT-registered business, buy or sell VAT-exempt goods, your business is set up in Northern Ireland, or you supply goods and services to the UK even if you are not based there, then you need to register for VAT.
You can still choose to voluntarily register even if your turnover is below the threshold because VAT gives your company a kind of credibility that makes people think your turnover is high. Your VAT can also be claimed on the goods and services you sell. This means that VAT registration can be good for your company.
Note, however, that if your taxable turnover exceeds the threshold and you have not registered for VAT in due course, you will be penalised by HMRC.
What is a Limited Liability Company?
The term limited liability simply means that, compared to sole trading, you would not be solely responsible for the liabilities like debt, litigations or losses against the company.
Rather, when a business registers a LLC, the company becomes legally separate from its owner and takes responsibility for itself.
In addition, the tax payments may become reduced.
Is there a downside to registering a business as an LLC?
Well, since everything that has an advantage also must have a disadvantage, the answer is yes. The processes involved in proper accounting are more elaborate and may compulsorily need the expertise of an accountant, and there is the need for filing annual accounts and confirmation statements with Companies House.
The annual accounts filing involves presenting your company’s balanced account records each year to the government while the confirmation statement is simply used to declare that all information presented to the Companies House is accurate. Doing this every year may be tedious.
Also, since all your company’s information is available in the government’s registry, there is no privacy and your competitors can easily get information about your company if they are so inclined.
In conclusion, there are many different types of companies that you can register and these range from sole traders to limited companies.
Registering a company in London, or even in the UK, is not difficult, but it does require some paperwork and certain legal steps.
The process starts with you deciding on what type of company formation you want and filling out an online form on the government website at Companies House.
Once your application online has been submitted, you will need to provide digital copies of your passport or identity card for all members of the company and proof of address for each member of staff. You will also need to provide bank statements showing that each member has £5,000 or more in their account.
How to register a company in London?
1. Choose a name for your company
Make sure the name is not in use by another company or trademark by making use of the Companies House checker, nor does it contain offensive or suggestive words
A team of experts will get you the answers you need to get started with your business.Start now