New Business Formation
New Business Formation
Having the right expertise on your side when setting up your company is vital. At Sturdy Consulting, we offer a service that not only gets the company up and running, but advises you of all your compliance requirements and remuneration strategies. We look at your long term goals and make sure that you have the plans, documents and structure in place to achieve them.
Our service will include advising on the best structure, registering with Companies House, appointing officers and issuing shares and share certificates. We will also write up statutory records and minutes of your first directors’ meeting. With strong tax expertise, we will advise on and register you for VAT, register the company for corporation tax, provide tax advice on ‘benefits in kind’ and advice on tax efficient income extraction.
How to form a company
Incorporating a limited company or LLP is a very simple process. You complete an application form and filing fee, submit it for approval and start trading as soon as you like.
Private limited companies
A limited company is a business that has been incorporated with Companies House to exist as a distinct legal entity that is separate from its owners. A company can be limited by shares or limited by guarantee. The personal finances of the owners are protected by ‘limited liability’, which means they are not responsible for paying for business debts above and beyond what they have invested in the company or guaranteed to pay.
The most popular type of company is a private company limited by shares. They are owned by shareholders and set up with a view to generate profits that can be distributed amongst the owners. The liability of shareholders is limited to the value of their shares.
A private company limited by guarantee is a popular business structure for non-profit organisations and charities. They are owned by guarantors - there are no shareholders or shares. The liability of guarantors is limited to the amount they ‘guarantee’ to pay toward business debts.
Limited Liability Partnerships
A Limited Liability Partnership, or ‘LLP’, is a business structure somewhere in between a limited company and a traditional partnership setup. LLPs operate with the flexibility of a normal business partnership, but they are incorporated at Companies House as legal individuals. This means LLP members (partners) are protected by limited liability for debts because the LLP itself is responsible for its liabilities.
LLPs are a popular business structure with professionals such as solicitors, accountants, doctors and dentists, because they can retain their preferred structure whilst protecting themselves with limited liability.
About Companies House
Companies House is the UK Registrar of Companies and an Executive Agency of the Department for Business, Innovation and Skills. As a registry of corporate information, Companies House is responsible for incorporating and dissolving companies, gathering and storing information about them and making this available to the public.
Any company or LLP that wishes to operate in the UK must be registered with Companies House in one of the following jurisdictions: England and Wales, Scotland or Northern Ireland. Companies House must be notified of any changes to a company’s details to ensure the accuracy of the corporate information disclosed on public record.
Limited company vs sole trader
A limited company differs from a sole trader business in a number of ways. By setting up a company, you can protect your personal finances from being used to cover any business debts – this is not possible when running a business as a sole trader, because there is no legal distinction between business finances and personal finances.
A limited company can also boost the status of your business and create a professional, corporate image. This is very appealing to prospective clients, suppliers and lenders.
Additionally, there are a number of tax advantages to running a business as a limited company. Sole traders pay Income Tax of varying rates on all business profits; limited companies pay corporation tax on business profits at a flat rate of 20%, although directors may have to pay Income Tax and National Insurance on their income if it exceeds a certain amount. Limited companies also present far greater tax planning opportunities than sole traders businesses.
Limited company directors and secretaries are collectively referred to as ‘officers’. Directors are appointed by members (shareholders and guarantors) to run and manage the day-to-day operations of the business. Secretaries are optional for private companies, but not public companies. They are usually appointed to assist directors with important administrative tasks.
Can anyone be a company director?
A director is the person appointed to run a company. This role can be held by a person or a corporate body. You can have just one director in your company, or you can have many - it’s up to you.
All natural (human) directors must meet the following criteria to be appointed:
Must be at least 16 years old
Cannot be an un-discharged bankrupt
Cannot be the company auditor
Cannot be on the Disqualified Directors Register
Shareholders (or guarantors) are often directors of the companies they own. It is very common for one person to set up a limited company by themselves and assume the positions of sole director and sole shareholder.
Duties of a company director
Directors are required to run a company in accordance with the Companies Act and the articles of association. They are placed in a position of trust and expected to promote the success of the business and make decisions for the benefit of the company alone, not for personal gain.
Directors are legally responsible for ensuring all filing and reporting requirements are met. This includes:
Registering the company for business taxes
Preparing and delivering confirmation statements, annual accounts and tax returns every year
Maintaining accurate accounting and company records
Making these records available for public inspection
Report changes to Companies House and HMRC
Managing payroll and PAYE
Failure to uphold these statutory duties can lead to fines, prosecution and disqualification.
Difference between a director and a shareholder
A director manages the company. A shareholder owns the company. However, it is often the case that those who are appointed as directors are also shareholders, and vice versa, particularly in small companies and start-ups.
What is a shareholder?
This is the name given to anyone who owns ‘shares’ in a company limited by shares. As a shareholder, you own part of a company in relation to the proportion of shares you hold. A company can have just one shareholder or many shareholders. Each one is entitled to receive a portion of profits in relation to the number and value of their shares.
Shareholders are commonly referred to as 'members'. The first members in a company - the people who set register the business and agree to become members - are also known as 'subscribers' because they subscribe their names to the memorandum of association during the company formation process.
Can anyone be a shareholder?
Yes, any person or corporate body (company, firm, organisation etc.) can be a shareholder of a private company limited by shares.
What is the minimum number of shareholders required to register a limited company?
Companies House requires at least one shareholder to incorporate a private company limited by shares. There is no maximum number of shareholders a company can have.