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How To Form a UK Limited Company
When starting a business, a large number of people go down the
route of forming a limited company or, to give it its full title,
a limited liability company.
The alternative for someone starting up in business on their
own is to trade as a sole-trader. There is less formal paperwork
involved in going into business as a sole-trader, but a limited
company can offer a number of advantages. These include greater
opportunities to reduce the amount of tax your business pays, and
increased protection of your personal assets in the event of the
business running into problems.
This article explains how a limited company is structured, and
details the steps you need to take to form your own limited
company.
The first thing you will need to do is to decide on a name for
your new limited company. Companies House maintains a list of all
companies registered in the UK, and you can use their website to
check if the name you want is available or whether it is already
in use by another company.
Whatever name you opt for will have to have the word "limited"
(often abbreviated to Ltd) at the end. So if, for example, your
wanted to call your new business "The Ultimate Widget Company"
then the full name of your limited company would be The Ultimate
Widget Company Limited or The Ultimate Widget Company Ltd.
Your new company will need at least two people to act as
officers of the company. One of these people will be the company
secretary. The other person will be a director of the company. If
you wish, the company secretary can be a director as well, but
he/she cannot be the sole director.
The company secretary has certain legal responsibilities such
as ensuring that the company submits annual returns to Companies
House and that the company and its directors operate within the
law.
Many people going into business on their own choose their
spouse or another family member to fulfil the role of company
secretary. Where two or more people are forming a limited
company, one of them will often take on the job of company
secretary in addition to being one of the directors of the
company.
An alternative is to use the services of a third party firm
who provide company secretary services to your business in return
for an annual fee.
The next thing to decide is how you will allocate shares in
your new company. You will need to specify how many shares your
company has and the value of them. Typically, companies are
formed with 100 or 1000 shares with a value of £1 per
share.
Some or all of these shares are then issued to the
shareholders in return for the appropriate sum of money.
Ownership of shares gives the shareholders the right to vote at
company meetings and entitles them to be paid dividends on their
shares based on the profits of the company.
Any shares which remain unsold are known as unallocated
shares.
It is a good idea to seek advice from an accountant at this
point, in order to make sure that the allocation of shares is
done in the most tax efficient way for your own particular
circumstances.
The final decision to make before forming your limited company
involves the company's registered office. Under Company Law, all
companies are required to have a registered office.
The registered office of a company is the address where
official documents can be served and where certain statutory
documents relating to the company are kept and can be made
available for inspection.
Common choices for the registered office address are either
the home address of one of the directors of the company, or the
office of the company's accountants.
Having made all these decisions, you now have all the
information you need to form your limited company.
The quickest and cheapest way to form a company is using one
of the many online company formation services. For a fee of
around £30 to £50 they will process your application
with Companies House and send you all the required company
documents by email for you to print out. For an additional fee,
they will normally provide printed copies of the documents if you
wish, but for most people this is not considered necessary.
An alternative to forming the company from scratch yourself is
to buy what is known as an "off the shelf company".
Off the shelf companies are companies which have been formed
already by a company formation agent, but which have not yet
traded. You pay a fee to the formation agent and they then
transfer ownership of the ready-formed company to you.
Obviously, with an off the shelf company you are restricted on
your choice of name for your company, as you can only pick from
the list of pre-formed off the shelf companies that the formation
agent has available at that time. However, once you have bought
your company you can apply via Companies House to change its
name, but there is a fee for this.
As off the shelf companies tend to work out more expensive and
less flexible than forming the company yourself, it makes sense
in the majority of cases to form the company yourself using one
of the online formation services.
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Copyright 2005 David Miles. You are welcome to reproduce this
article on your website, so long as it is published "as is"
(unedited) and with the author's bio paragraph (resource box) and
copyright information included. In addition, all links to
external websites must be left in place.
David Miles is the editor of a number of business and finance
websites including The Cash Clinic - a UK Personal Finance Portal.
MORE RESOURCES:
Selling structured settlementsInfos Jeunes France, France - Nov 25, 2008Alternative arrangements know as structured settlements were created in the 1980's. Under these arrangements the beneficiary would receive cash structured ... |
From comments: lawyer referral feesOverlawyered, NY - 22 hours ago... by marketer lawyer advertising (with companies providing cash in exchange for assignments of lawsuit structured settlements also prominent there). ... |
Father paved way for Street's debutDenver Post, CO - Nov 17, 2008... and Nixon Coming" — on Monday, at the Austin, Texas, offices of The James Street Group, a financial firm that specializes in structured settlements. ... |
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