Company formation in the UK has become relatively simple over the past few years. Previously it would involve a heavy load of paperwork and either, an astute legal brain or the presence of a solicitor, to fully negotiate it. However, upon the emergence of several Internet based companies, designed to aid in the formation of new businesses, it is now a great deal easier.Company formation can occur for a whole number of reasons. It mainly happens when an individual would like to separate themselves from their line of self-employment. By setting a private company, they reduce the risk involved and make things a lot more official.
How to form a company
The process of company formation relies on the completion of a few mandatory documents. These can be a bit of a pain in the neck, especially if you are setting a small company, however unfortunately you cannot move forward until they are completed. If you are setting up your company online, then invariably the provider will take care of all of these issues, however if you’re attempting to deal with the procedure yourself then you will need to investigate the following aspects.
The first thing you will need to decide is the type of company you are looking to register. The main types of company are:
- Private Limited Company
- Private Unlimited Company
- Limited Liability Partnership
- Public Limited Company
Memorandum of association
This is the fist document to tackle and arguably the most important. The memorandum of association sets out all of the fundamentals in your new company. These can include; your company name, the location of you home office, the directors or the liable parties. This then must be signed by all subscribers, validating the mentioned document.
Articles of association
This document sets out the regulating conditions as well as setting out the governance of the company and internal affairs. The articles of association vary slightly, depending on which type of company you are starting, e.g. private or public company.
This is the form that details all of the information regarding the company’s directors. In the event of misconduct or legal action the major shareholders or directors will need to be contacted, so this needs to be recorded in some format. These details are pretty standard for the process; DOB, passport number, home address, office address, NI number etc. They must also submit any directorships that they have held during the past five years. This is to prevent persons who own an existing company that is either under investigation or undergoing administration from starting up a new one. Also this is the section that sets out the roles of both director and secretary. A company has to fulfil these basic requirements, meaning that you cannot begin company formation with only one member of staff.
Finally, the form 12 document, is the notice of legal compliance from all involved in company formation. This acts as a declaration from the directors stating that event of bankruptcy of administration then they are to be held accountable for any debt ensued. It also subject to the disqualified directors register.
Choosing a name
You might be wondering whether or not you can choose any name for your company once you have started it up. Well although this is a very complicated matter, the simple answer is no. The best way to avoid any complications with similarity of name is to consult the company names index. This way not only can you check whether your company name has already been taken, but if there are any companies with similar titles in your field.
Any registered company has the right to make a complaint the authorities if they think that you are treading on their toes, so to speak, with the choice of your company name. For example if you were to begin a telephone company called ‘Vodaphone’, then the likelihood is that you would encounter severe opposition from the mobile magnates Vodafone. Any newly formed company has 12 months under which it is liable to objection from any registered office. If it is seen to be replicating or mirroring an existing company then it will be disbanded and forced to operate under a different name.
The cost of starting up
The cost of forming a company can range from low £xx to mid £xxx depending on how you go about it. In times gone past, it usually consisted of acquiring the documents and then registering it manually with the appropriate authorities. However, nowadays the majority of registration is done online, through a number of specially designed web based operators who deal with the whole process for you.
This can even involve name suggestion and the setting out of contracts. By removing all related hassle from the company formation procedure, these operators will charge you in the region of £100. You can still go about the method manually, in which case it will cost you £20 for the registration fee.