Registering a new business
There are on average 1500 companies registered every day in the UK. This article will explain what kinds of companies are available for registration and how the incorporation process works.
Types of companies
The choice of a company depends on a few factors such as: the company’s purpose, the budget, attitude of partners or directors towards their liability, profession of those forming the company and their approach towards the obligation to comply with different legal requirements imposed on different company types.
Private company limited by shares
The majority of small companies registered in the UK are companies limited by shares. This is due to the relatively simple formation process and the fact that such companies are designed to make a profit which can then be retained in the company or distributed to its shareholders as dividends.
By statute, such companies must have at least one director who must be an individual aged 16 or over. The company’s shareholders’ liability to creditors is limited to the value of the capital originally invested in the company by purchase of its shares (i.e. the nominal value of shares and any premium paid in addition). Thanks to their ‘limited’ status, shareholders’ personal assets beyond their original investment are protected, for example, in the event of insolvency.
Shares of a private limited company may not be offered to the general public.
Private company limited by guarantee
This type of company is primarily used by non-profit organisations such as clubs, membership organisations, associations, statutory bodies such as ALMOs or workers co-operatives. The liability of the members is limited to the amount of money they have promised to pay to the organisation as a guarantee in case the company is wound up while they are a member or within one year of their ceasing to be a member. The amount that is guaranteed can be as little as £1.
Members of a company limited by guarantee do not own the company and cannot participate in the distribution of the company’s profits through dividends, nor do they have any claim upon the assets of the firm. However, where members are directors, they have a right to decide about the firm’s future.
Public limited company
Such companies have a share capital of at least £50,000 (or €65,600) in value and the liability of each member is limited to the par value of shares a member holds. At least two members, two directors and one company secretary must be nominated. The directors can also be the company’s members and/or its company secretaries. At least one of the directors must be a natural person aged 16 and over.
Registering a PLC entails many benefits as well as more stringent capitalisation and governance requirements. Public limited companies have access to capital markets and may offer their shares to the general public. Listed PLCs are subject to strict regulations and must follow certain procedures designed to prevent fraudulent activities, such as adherence to the Combined Code, the Listing Rules or the AIM Rules.
Limited liability partnership
LLPs are often chosen by professionals such as lawyers, doctors, accountants or architects who wish to form a company with one or more partners and protect individual assets from the legal consequences of becoming insolvent. Members of a limited liability partnership have a joint responsibility for the claims made against the firm however only to the amount agreed in the LLP agreement (which usually is the sum of the capital each of them contributed to the company).
Community Interest Company
This is a type of limited liability company ideal for those who want to conduct a business or other activity for the benefit of a community. Charities, political parties, political campaigning organisations or companies cannot become a CIC.
A CIC has greater flexibility in terms of activities than a charity. There are no trustees or trustee control, and directors of Community Interest Companies can receive remuneration. CICs enjoy lighter regulation and administration and fewer reporting requirements than charities. A CIC limited by shares can become a public company and be quoted on the stock exchange in the future.
Community Interest Companies, however, must give transparency of their operations. They are monitored by the CIC Regulator who also has an enforcement role in order to ensure that the CIC’s activities serve the community purpose for which they have been set up.
Right to manage company (RTM)
This form of company allows leaseholders to take control over the management of their building and is open to the majority of owners of private leasehold flats. Lessees can appoint a management company for their building. In order to be able to form a RTM, at least 50% of flat owners must declare their willingness to do so, 2/3 of them must have long leases at time of issue, and less than 25% of the building’s floor area must be commercial.
Single director company
This is a private company, limited by shares, which is incorporated with one shareholder or whose membership is reduced to one person. Single director companies are ideal for those entrepreneurs who wish to keep decisions and quality of work under their control and are commonly used by freelancers, self-employed or home-based business owners.
Registering a company
Once the decision has been made regarding the type of company to be registered, the incorporation process can start.
Most future business owners, due to lack of time or knowledge, choose a formation agent to register their company. The agent prepares all the incorporation forms and sends them together with the relevant fees to Companies House. The agent can also assist in the preparation of the Articles of Association and the Statement of Capital and Initial Shareholdings (in the case of private companies limited by shares) or the Statement of Guarantee (in the case of companies limited by guarantee).
Parties wishing to register their business on or after 1 October 2009 will have to provide the following information to the Registrar: names of directors/members, their residential and service addresses, the company’s proposed registered office address and the name and address of the company secretary (where applicable).
To incorporate a limited company, a new Form IN01, the Articles of Association and the Statement of Capital, together with the correct fee, must be filed. At the moment the paper incorporation fee is £20, electronic incorporation £15, same day paper incorporation £50[1].
Some types of companies require more complicated registration processes. For example, an application to form a Community Interest Company must be first approved by the CIC Regulator before it can be filed at Companies House.
More information on the new Articles of Association and Statement of Capital and Initial Shareholdings can be found in the article ‘Companies Act 2006 – impact on company’s constitutional documents’.
Conclusion
Registering a new company is an easy and straightforward process when done with the help of a professional incorporation agent. There are many firms offering cheap and quick formation services but the level of support that can be expected from them is often minimal or non-existing. It is therefore recommended to spend some time researching a trustworthy and professional incorporation agent.
[1] www.companieshouse.gov.uk, 8.09.2009
Types of companies
The choice of a company depends on a few factors such as: the company’s purpose, the budget, attitude of partners or directors towards their liability, profession of those forming the company and their approach towards the obligation to comply with different legal requirements imposed on different company types.
Private company limited by shares
The majority of small companies registered in the UK are companies limited by shares. This is due to the relatively simple formation process and the fact that such companies are designed to make a profit which can then be retained in the company or distributed to its shareholders as dividends.
By statute, such companies must have at least one director who must be an individual aged 16 or over. The company’s shareholders’ liability to creditors is limited to the value of the capital originally invested in the company by purchase of its shares (i.e. the nominal value of shares and any premium paid in addition). Thanks to their ‘limited’ status, shareholders’ personal assets beyond their original investment are protected, for example, in the event of insolvency.
Shares of a private limited company may not be offered to the general public.
Private company limited by guarantee
This type of company is primarily used by non-profit organisations such as clubs, membership organisations, associations, statutory bodies such as ALMOs or workers co-operatives. The liability of the members is limited to the amount of money they have promised to pay to the organisation as a guarantee in case the company is wound up while they are a member or within one year of their ceasing to be a member. The amount that is guaranteed can be as little as £1.
Members of a company limited by guarantee do not own the company and cannot participate in the distribution of the company’s profits through dividends, nor do they have any claim upon the assets of the firm. However, where members are directors, they have a right to decide about the firm’s future.
Public limited company
Such companies have a share capital of at least £50,000 (or €65,600) in value and the liability of each member is limited to the par value of shares a member holds. At least two members, two directors and one company secretary must be nominated. The directors can also be the company’s members and/or its company secretaries. At least one of the directors must be a natural person aged 16 and over.
Registering a PLC entails many benefits as well as more stringent capitalisation and governance requirements. Public limited companies have access to capital markets and may offer their shares to the general public. Listed PLCs are subject to strict regulations and must follow certain procedures designed to prevent fraudulent activities, such as adherence to the Combined Code, the Listing Rules or the AIM Rules.
Limited liability partnership
LLPs are often chosen by professionals such as lawyers, doctors, accountants or architects who wish to form a company with one or more partners and protect individual assets from the legal consequences of becoming insolvent. Members of a limited liability partnership have a joint responsibility for the claims made against the firm however only to the amount agreed in the LLP agreement (which usually is the sum of the capital each of them contributed to the company).
Community Interest Company
This is a type of limited liability company ideal for those who want to conduct a business or other activity for the benefit of a community. Charities, political parties, political campaigning organisations or companies cannot become a CIC.
A CIC has greater flexibility in terms of activities than a charity. There are no trustees or trustee control, and directors of Community Interest Companies can receive remuneration. CICs enjoy lighter regulation and administration and fewer reporting requirements than charities. A CIC limited by shares can become a public company and be quoted on the stock exchange in the future.
Community Interest Companies, however, must give transparency of their operations. They are monitored by the CIC Regulator who also has an enforcement role in order to ensure that the CIC’s activities serve the community purpose for which they have been set up.
Right to manage company (RTM)
This form of company allows leaseholders to take control over the management of their building and is open to the majority of owners of private leasehold flats. Lessees can appoint a management company for their building. In order to be able to form a RTM, at least 50% of flat owners must declare their willingness to do so, 2/3 of them must have long leases at time of issue, and less than 25% of the building’s floor area must be commercial.
Single director company
This is a private company, limited by shares, which is incorporated with one shareholder or whose membership is reduced to one person. Single director companies are ideal for those entrepreneurs who wish to keep decisions and quality of work under their control and are commonly used by freelancers, self-employed or home-based business owners.
Registering a company
Once the decision has been made regarding the type of company to be registered, the incorporation process can start.
Most future business owners, due to lack of time or knowledge, choose a formation agent to register their company. The agent prepares all the incorporation forms and sends them together with the relevant fees to Companies House. The agent can also assist in the preparation of the Articles of Association and the Statement of Capital and Initial Shareholdings (in the case of private companies limited by shares) or the Statement of Guarantee (in the case of companies limited by guarantee).
Parties wishing to register their business on or after 1 October 2009 will have to provide the following information to the Registrar: names of directors/members, their residential and service addresses, the company’s proposed registered office address and the name and address of the company secretary (where applicable).
To incorporate a limited company, a new Form IN01, the Articles of Association and the Statement of Capital, together with the correct fee, must be filed. At the moment the paper incorporation fee is £20, electronic incorporation £15, same day paper incorporation £50[1].
Some types of companies require more complicated registration processes. For example, an application to form a Community Interest Company must be first approved by the CIC Regulator before it can be filed at Companies House.
More information on the new Articles of Association and Statement of Capital and Initial Shareholdings can be found in the article ‘Companies Act 2006 – impact on company’s constitutional documents’.
Conclusion
Registering a new company is an easy and straightforward process when done with the help of a professional incorporation agent. There are many firms offering cheap and quick formation services but the level of support that can be expected from them is often minimal or non-existing. It is therefore recommended to spend some time researching a trustworthy and professional incorporation agent.
[1] www.companieshouse.gov.uk, 8.09.2009
posted by London Registrars at
15:26
