This Content Was Last Updated on March 16, 2023 by Jessica Garbett
Setting Up a Limited Company
The main steps are:
- Registration of your company at Companies House
- Opening a business bank account
- Registering the company with HMRC for Corporation Tax
- Registration with HMRC as an employer
- Registration with HMRC for VAT (if relevant)
YogaTax can take care of most of this as a Company Formation package which costs £120 + vat – the only thing not covered is opening a business bank account.
For a business bank account, we recommend for speed and ease you start with a bank who you have an existing private relationship with; there are several other options available in terms of challenger banks though. Regulatory requirements these days mean business banking can be time consuming to set up.
Historically companies had to have defined objects when they were set up, and they were restricted to trading in those defined sectors – this is no longer the case and, unless specified to the contrary in the Memorandum or Articles of Association, companies can trade in all lawful sectors and activities.
Additionally, you may need to consider:
- Insurances – Professional Indemnity, Public Liability, All Risks – depending on their circumstances
- Registration with Information Commissioner
- Registration of Domain Names and Website
- Business Bank Account – all companies need a separate business bank account, and
Some things to think about before starting to register a company:
- Registered Office – this is where official tax papers and Companies House papers are sent and is normally your home or your accountants office. We offer a free registered office service to our clients.
- Accounting Reference Date – this is the company’s year end, although the first “year” may be more or less than 365 days. A year end of 31 March annually is the simplest to use as it ties in with the tax year.
- Directors – these are the individuals responsible for running the company, and there must be at least one. A director is responsible for running the company on the shareholders’ behalf, and also has legal responsibilities for making sure the company does not trade whilst insolvent, pays its taxes and files returns and accounts at Companies House and HMRC.
- Company Secretary – it’s no longer compulsory to have a secretary, although some companies still do. The company secretary is an administrative role with less responsibility than a director.
- Issued Share Capital – the issued share capital is the number of shares issued – normally 100. The size of the issued capital is more important as it defines the flexibility for nominating share holdings – eg if two shares are in issue then the only option is two shareholders with 50% each, or one shareholder with 100%, whereas if 100 shares are in issue then there are permutations so one shareholder could have 25 shares and another 75 shares, making 25% v 75% ownership. Do be clear on the difference between the number of shares and the percentages – eg if there are two shares issued and you own one share, you have 50% control, the same as if there were 100 shares issued and you owned 50 of them.
- Shareholders – these are the owners of the issued shares. Shares can, in theory, be put into the names of family members, but there are pitfalls here, and the situation needs to be reviewed on a case by case basis. The shareholders and directors are often the same people in a small company, but they are separate roles – shareholders own the shares, directors direct the business. It is entirely possible to have shareholders who are not directors, and directors who are not shareholders.
Once registered, Companies House will issue a Certificate of Incorporation, which is the corporate equivalent of a birth certificate.
The person forming the company will provide you with the Memorandum and Articles of Association. The Memorandum of Association sets out key facts about the company, and the Articles of Association form the company’s rule book for matters like share transfers, appointment of directors, etc. The Articles of Association are normally based on Table A, which is a standard set of Articles set out in the Companies Act.
Time Scales for Forming a Company
If you ask us to form a company for you, then generally:
- Submission to Companies House – we normally do this same day or next day, and will let you have a company number as soon as we hear back from Companies House. Normally we have the company number within 24-48 hours.
- Completion of file opening – we have a number of formalities to complete, including identification and sending you a comprehensive welcome pack, and where requested dealing with vat registration, etc – we tailor our advice bespoke to each client to make sure you are setting out on the right foot – allow a week for this, although it’s normally just a few days.
- Bank accounts – bank account opening is never quick these days due to banks’ customer identification requirements and bureaucracy. We strongly advise clients to start with their existing bank as that should be the quickest route. The bank account must be in the company name, and can’t be processed until the company is registered at Companies House.