If you have come up with a brilliant business idea for a new company, your next step is company formation. Company formation in the UK is the process of incorporating a company with the registrar of companies, Companies House. By incorporating your company, you establish a completely separate legal entity that offers protection for your personal assets. Thankfully, forming a company in the UK is quick and simple, especially if you use a company formation specialist such as Uniwide Formations, who can handle much of the process for you. In this guide, we will explain all you need to know about how company formation in the UK, including choosing the right structure and completing the registration process.
What is company formation?
Company formation, sometimes referred to as company incorporation, is simply the process of registering a company in the UK with the official registrar of companies. Your company will be a legal entity that is entirely separate from you as the owner, providing limited liability protection, enhanced credibility, and tax benefits. Once formed, your company can hire employees, enter into business contracts in its own right, and open a corporate bank account to facilitate financial transactions.
Why incorporate a company?
Incorporating a company is not the only way to run a business in the UK, but it offers substantial benefits over other approaches such as self-employment (‘sole trader‘), limited liability partnerships (LLPs), social enterprises, overseas companies, and unincorporated associations. If you are unsure which is best for your needs, we recommend speaking to an accountant or tax advisor in the UK. If you require, we can introduce you a trusted accountant in the UK at no cost. The most popular company type in the UK is a private limited company with shares.
There are several compelling reasons to incorporate a limited company in the UK:
- Limited liability – limited liability means that your personal assets are protected from business creditors.
- Credibility – operating a registered limited company will enhance your reputation with customers, suppliers, and investor.
- Access to capital – as a limited company, you will have the ability to raise funds by issuing shares to investors. If you go public, your business can raise capital from other public shareholders.
- Tax efficiency – limited companies benefit from lower corporation tax rates compared to sole traders.
Prior to company formation
1. Choose your business structure
There are several different types of company structures available when incorporating a company in the UK. The most common options are:
- Private Limited Company (Ltd) – limited companies are suitable for most small businesses, offering limited liability for shareholders.
- Public Limited Company (PLC) – public limited companies are intended for larger businesses that wish to sell shares to the public.
- Limited Liability Partnership (LLP) – LLP is typically chosen by professional service providers such as law firms, architects, doctors and dentists.
2. Select a Company Name
Once you have decided on your company business structure, the next step is to choose a company name. This step should not be rushed. Not only will your company name help to establish your brand, but the name you adopt must be unique and comply with the Companies House guidelines.
Since there are a number of things to consider when selecting a company name, here are some of our top recommendations:
- Keep it short, simple, and easy to remember.
- Choose a name that reflects the type of business that you will be doing.
- Check that your business name is not the ‘same as’ to or ‘too like’ an already registered company. If you are unsure if your company name meets these criteria, you can check using our free company name check tool.
- Check the list of existing trademarks.
- Ensure that the name you choose does not contain any protected words such as ‘royal’ or ‘trust’. If you want to use a protected work in your company name, you will need permission from Companies House first.
3. Choose your company directors and company secretary
Before you register your company, you will need to decide who will hold the role of company director and company secretary. You must appoint at least one company director, but there is no legal requirement to have a company secretary.
As a company director, you must adhere to the articles of association, keep company records and report changes, file company accounts and Company Tax Returns, and pay corporation tax, among other duties and obligations.
4. Registered office and service address
Your company must have a registered office address in the UK to be used for official correspondence (e.g. letters from HMRC or Companies House). As a director, you must also provide a service address, which can differ from the registered office address (remember, these addresses are listed publicly). Your UK-based accountant will be able to explain the rules of company addresses to ensure that you are adhering to them. You will also need to decide on a registered email address for your company.
5. Identify people with significant control (PSC)
When you register your company, you will need to inform the Companies House of any persons with significant control (PSC) over your company, otherwise referred to as ‘beneficial owners’. This includes anyone with more than 25% of shares in the company, more than 25% voting rights in the company, or the right to appoint or remove the majority of the board of directors.
6. Prepare your Memorandum and Articles of Association
During the company formation process, you will need to prepare and submit key documents, including your Memorandum of Association and Articles of Association. A Memorandum of Association is a legal statement signed by shareholders or guarantors agreeing to form the company. Articles of Association set out how the company will be run, including rules for directors, shareholders, and meetings. A company formation agent can help you create these documents.
7. Choose your SIC code
You will be asked to provide a standard industry classification (SIC) code when you register your company. This denotes the area of business that you operate in (i.e. the sector), e.g.:
- 86101 Hospital activities
- 86102 Medical nursing home activities
- 86210 General medical practice activities
- 86220 Specialists medical practice activities
The company formation process
Once you have gathered all of the necessary information to setup your company, you can prepare and submit an application to incorporate your company to Companies House. The application process can be completed either online through a company formation specialist or through the Companies House website. It is also possible to apply by post by using form IN01.
Before you apply, you will need to create a Government Gateway ID and password if you don’t already have one. You will also need a minimum of 3 items of personal information about yourself and any shareholders or guarantors. These may include, for example, town of birth, mother’s maiden name, father’s first name, phone number, NI number, or passport number.
Once you have submitted your company formation application, you will normally receive a Certificate of Incorporation containing your company registration number as proof that your company is now a legally registered entity. Using online incorporation services such as that provided by Uniwide Formations means that you should receive your Certificate of Incorporation on the same day (depending on the time that it is submitted. You will normally be registered for Corporation tax automatically as part of your company formation.
What to do after company formation
After you have setup your company and you have received your Certificate of Incorporation, there are further steps that you may need to take before you can start to operate, including registering for VAT within three months. If your turnover exceeds the VAT threshold (currently £90,000), you must register for VAT. Once registered for VAT, you will charge your customers VAT at the correct rate (typically 20%). At Uniwide Formations, we offer a VAT registration service to make the process as quick and simply as possible.
Your company will also need to meet your annual filing requirements with Companies House each year, providing a detailed record of your business’s financial performance. In addition, a confirmation statement must be submitted annually to verify that company information is accurate and up to date.
Summary of company incorporation requirements:
| Requirement | Details |
|---|---|
|
Company Name |
Must be unique and comply with UK naming rules (cannot include restricted or sensitive words without permission). |
|
Registered Office Address |
It must be a UK address (it can be a home address or a business address). |
|
Directors |
At least one director is required. Directors must be at least 16 years old and not disqualified from acting as a director. |
|
Shareholders |
At least one shareholder is required. A director can also be a shareholder. |
|
Share Capital |
A minimum of one share must be issued. The nominal value of each share must be specified. |
|
Memorandum of Association |
A legal statement signed by all initial shareholders agreeing to form the company. |
|
Articles of Association |
Rules governing the running of the company are signed by the shareholders. |
|
Persons with Significant Control (PSC) |
Must identify individuals who hold more than 25% of shares or voting rights in the company. |
|
Companies House Registration |
Submit incorporation documents and pay the registration fee (£12 online, £40 by post). |
|
Corporation Tax Registration |
Must register with HMRC for Corporation Tax within 3 months of starting business activities. |
Final words
By following the correct process for registering your company with Companies House and staying compliant with your tax and reporting obligations, you will benefit from limited liability, increased credibility, and potential tax savings. Whether you decide to handle the process yourself or use a company formation service, the rewards of incorporating a company are significant. For business people who are unfamiliar with the process, using a company formation service such as Uniwide Formations can make the process much easier and faster. We offer a range of company formation packages and services designed to make your business journey as streamlined and efficient as possible. We even offer a package for non-UK residents.
These are just some of the basics that you need to know about company formation in the United Kingdom. If you would like to set up your limited company, then you are most welcome to speak with our specialists.
