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How To Start Your Own Formations Company (UK)


Formations Company UK

Company Formation Made Simple

A limited company is a type of business structure where the company has a legal identity of its own, separate from its owners (shareholders) and its managers (directors). Even if a company has only one individual involved with it and that person is the only shareholder and the only director, the company is still a separate legal entity.

That means the company can enter into contracts, and be sued, in its own right. In the event that the company is sued, its directors and shareholders do not have to sell their own assets to pay the debt, unless, in the case of directors, they have been found guilty of wrongdoing or have given personal guarantees.


Setting Up A Limited Company UK

Unlike sole trading in which you are your business, a limited company is its own instrument with its own assets. Therefore, if you were to run into financial trouble, you wouldn’t have to sell personal assets to pay the debt.

This also means that any money earned by the company belongs to the company.

For example, let’s say you set up your own catering business and registered it as a limited company called Creative Catering Ltd. In this company, you are the sole director and shareholder.

When your client pays their invoice, this money belongs to the company. Creative Catering Ltd can then pay you a salary as the director or, if you have enough profits, dividends as a shareholder. Creative Catering Ltd can also pay you back for any business costs you’ve paid for personally, such as travel and hotel costs for client meetings, for example.

In essence, you are authorising payments from your company to yourself, adding an extra step between receiving money to your business and transferring it to your personal account for salary earnings.

Apart from those costs, any other money taken from the Creative Catering Ltd bank account may be subject to extra tax.


Companies House Register a Company UK

When you register as a limited company your company accounts and confirmation statement are made public. Your office address will also be in the public domain. However, it is possible to use your accountant’s office or a token address if you work from home. 

There are several different kinds of limited companies that can be set up in the UK, but the most common two are; 

  • Private Limited Company – limited by shares (Ltd.): This the most popular kind of limited company. With this kind of company, the public isn’t able to buy shares in the business and shareholders are only responsible for their percentage of investment. So, if a shareholder invests 40% of the cost of the business, they are responsible for 40% of the company.
  • Public Limited Company (PLC): This is similar to a private limited company, except that shares are offered to members of the public. Taking a company public requires at least two directors and shareholders, a company secretary and a minimum of £50,000 of issued share capital.

To register your business as a limited company, you need to set up with Companies House. This can be done online on the GOV.UK website or via post by completing an INO1 form.

A limited company can be formed by one or more people by signing their name on a memorandum of association. This is their agreement to form the company. A ‘person’ includes individuals and companies.

To set up as a limited company with Companies House, you’ll also need:

  • A company name and address)
  • At least one director (including their name, address and date of birth)
  • A least one shareholder (the shareholder and director can be the same person)


Choosing a Name For Your Company

Your company name must end in ‘Limited’ or ‘Ltd’.

It needs to be original too. If your name is the same or too similar to another name, you may have to change it.

Companies House also states that names cannot contain any sensitive words or expressions, cannot be offensive, and cannot suggest a connection to government or a local authority without permission.

Something to keep in mind is that you don’t have to trade under your company name. You can choose one name as your registered name and another to trade under. For example, Asda Stores Ltd trades in the UK as Asda.

As with a sole trading business name, a trade name cannot:

  • Include ‘limited’, ‘Ltd’, ‘limited liability partnership, ‘LLP’, ‘public limited company’ or ‘plc’
  • Contain a ‘sensitive’ word or expression unless you get permission
  • Once you’ve chosen a business name and completed the application, make sure to check all details carefully before submitting it. Any information that needs to be changed at a later date may incur a charge.

It’s also important to note that not everyone can be a Company Director. Anyone who is under the age of 16, has been disqualified from acting as a company director, or is an undischarged bankrupt cannot be appointed as a director. These, however, are the only restrictions.

Finally, if your turnover reaches £85,000 or you expect sales to be greater than that total in a year, you’ll also need to register for VAT with HMRC.


Limited Company Formation Packages 

If you are not confident forming a new company on your own, there are cheap company formation businesses out there than can do the work for you.

Most will look after everything from your company formations, to helping setup your business bank account and sometimes much more.

When it comes to finding best company formation agent for you, it pays to shop around and weigh up the varying offerings of the different companies working in this field.

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Business Opportunities How to start your own formations company (UK)