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Limited company formation is the process of incorporating a business at Companies House in the structure of a limited company. Upon incorporation, a private limited company becomes a separate legal entity; an ‘individual’ that is completely distinct from its owners and responsible for its own finances, assets and liabilities.

If a company becomes insolvent, the owners (shareholders or guarantors) cannot be held personally liable for debts or claims beyond the amount they have invested in shares or committed to pay in guarantees. This financial protection is known as ‘limited liability’ and it is one of the foremost reasons for choosing to operate as a limited company rather than a sole proprietorship.

Sole traders do not enjoy the financial protection of limited liability. There is no distinction between their business finances and personal finances. This means they have unlimited liability and are wholly liable for all business debts and claims.

Once incorporated, companies must adhere to strict accounting practices and reporting requirements in accordance with the Companies Act 2006. All corporate details are placed on public record to ensure full disclosure and transparency for the benefit of the public.

Content summary:
1. How to form a company in England and Wales, Scotland or Northern Ireland
2. How many people are required to form a limited company?
3. How long does it take to incorporate a private limited company?
4. How much does it cost to set up a company?
5. Is there a minimum age requirement to form a company?
6. Can I form a UK company as a non-UK resident?
7. What addresses are required to form a company?
8. What documents are required to form a company?
9. The difference between a company limited by shares and a company limited by guarantee
10. What does ‘limited liability’ mean?
11. What happens if Companies House rejects my application?
12. When can my new company start trading?
13. Do I need to tell HMRC when I register a company?
14. What company details are displayed on public record?

1. How to form a company in England and Wales, Scotland or Northern Ireland

UK companies are incorporated under one single company law regime – the Companies Act 2006. However, Companies House operates in three separate jurisdictions throughout the UK – England and Wales, Scotland and Northern Ireland.

Companies must register in one of these jurisdictions. This decision will determine the location of their registered office. They are only permitted to incorporate in one jurisdiction and this cannot be changed at any time. However, they can operate throughout the whole of the UK and overseas.

You do not have to register your company in the part of the UK in which you live. It is entirely possible to set up a company in England and Wales, for example, if you live in Scotland. But your registered office must be situated in England or Wales.

The quickest and easiest way to incorporate is through an approved online company formation agent. Application forms are completed online and submitted electronically to the Registrar in Cardiff (England and Wales), Edinburgh (Scotland) or Belfast (NI). Typically, most applications are approved by Companies House in less than 3 working hours.

Our 5-step company formation process

1. Choose a company name: To find out the availability of your proposed name, simply enter it into our online name-check tool. You can find it on our homepage. This system will compare any name you enter against the Index of Company Names at Companies House. Results are instantaneous, so you will find out immediately if it’s available, if you need to make adjustments, or if you have to provide documentation to support the inclusion of any ‘sensitive’ words or expressions. Full guidelines on choosing a company name and can found here.

2. Select a company formation package: We offer a wide selection of packages for companies limited by shares, including a tailor-made package for limited by guarantee incorporations.

3. Add company address services: All limited companies must provide details of a registered office. A service address must also be provided by all directors, subscribers, company secretaries and Persons with Significant Control (PSCs). 1st Formations provides a London Registered Office Service for companies registered in England and Wales, as well as a Service Address and Business Address Service.

4. Complete the online application form: Our online application form is really easy to complete and it requires only a few minutes of your time. You must provide the following information:

  • Company name.
  • Registered office address.
  • Description of main business activities (SIC code)
  • Director’s details (minimum of one, must be least 16 years old).
  • Shareholder’s or guarantor’s details (minimum of one)
  • Secretary details (optional).
  • Information about People with Significant Control.
  • Memorandum and articles of association
  • Statement of capital (this outlines the share capital of a company limited by shares).
  • Supporting documentation (required if your company name contains any sensitive words or expressions, or is similar to the name of another company)

5. Submit your online application to Companies House: We will check your company formation application before sending it to Companies House. They will process your application within approximately 3 working hours (weekends excluded) and you will be notified as soon as it’s approved.

You will receive a confirmation email containing digital copies of share certificates (if applicable), a certificate of incorporation, and the memorandum and articles of association. You can download and print these documents any time you wish. If your company formation package includes paper incorporation documents, we will post these out to you within 24-48 hours.

2. How many people are required to form a limited company?

Whilst you must have a minimum of one director (officer) and one shareholder/guarantor (member), it is entirely possible for one person to assume both roles and incorporate on their own. This is extremely convenient for many people, particularly sole traders who wish to retain complete ownership and full control of their business. It’s also a great option if you just don’t like working with other people. Alternatively, you may appoint multiple directors and members during and after company formation.

3. How long does it take to incorporate a private limited company?

Most are incorporated online though a company formation agent because it’s the easiest and quickest option. Generally, it takes no longer than 3 working hours for Companies House to approve these applications. Your company will then be ready to trade as soon as this happens.

Aside from this option, you can incorporate online or by post directly through Companies House. This process takes around 2-10 days to complete.

4. How much does it cost to set up a company?

The cost of forming a limited company through 1st Formations starts at just £9.99 plus VAT. There will be no additional incorporation charges applied by us or Companies House.

Limited companies can also be incorporated using Companies House Web Incorporation Service or postal application. These methods cost £12 and £40, respectively.

5. Is there a minimum age requirement to form a company?

Directors must be at least 16 years old at the time of company formation.

There is no statutory provision prohibiting any persons under this age owning shares. Family owned private companies often give shares to child family members as a long-term tax planning strategy for inheritance and capital gains purposes.

6. Can I form a UK company as a non-UK resident?

Provided all legal requirements are met, almost anyone can set up a private limited company in the UK, irrespective of where they reside. The growth and accessibility of online company formation services has made it increasingly easy to incorporate from anywhere in the world. If you have a computer, an Internet connection and a credit card, you’re good to go.
Our online company formation package for non-UK residents

Application forms can be completed online within a few minutes, submitted electronically to Companies House and approved in less than 3 hours. Registration documents are emailed to you in digital (PDF) format and your new company is then ready to trade. There is absolutely no need to be in the UK, nor do you have to sign anything in person or send documents by post.

We provide online company formation services for UK residents and non-UK residents. We also have a London Registered Office Service that is ideal for companies in England and Wales. All statutory mail and notices delivered to the registered office can be forwarded to any address in the UK or overseas. The purpose of a registered office is simply to provide Companies House and HMRC with a statutory mailing address that can be displayed on public record.

7. The difference between a company limited by shares and a company limited by guarantee

Private companies in the UK must be incorporated as limited by shares or limited by guarantee. They are owned privately by shareholders or guarantors (also referred to as ‘members’) and managed by appointed individuals known as ‘directors’.

The limited by shares structure is by far the most popular choice for any business that intends to make a profit for the benefit of its owners. The limited by guarantee structure is primarily used by non-profit organisations and charities that wish to generate income to promote and achieve their non-profit objectives Profits are not usually distributed to the guarantors.

7.1. About companies limited by shares

  • Usually set up by profit-making businesses.
  • Must be incorporated with Companies House with at least one shareholder and one director.
  • Each shareholder must agree to take at least one share.
  • The number and value of issued shares creates the company’s share capital.
  • The value of each member’s shares determines how much of the company they own, the amount of control they have, the limit of their liability for debts, and the percentage of profits they receive as dividend payments.
  • Usually adopt model articles of association.

7.2. About companies limited by guarantee

  • Usually set up by non-profit organisations like sports clubs, social clubs, members’ organisations, co-operatives, etc but can also be set up by profit-making businesses.
  • Must be incorporated with Companies House with at least one guarantor and one director
  • Each guarantor must agree to contribute a certain amount of money toward debts in the form of a ‘guarantee’.
  • The sum of a guarantee is the limit of a guarantor’s liability for debts.
  • Profits are normally reinvested in the business for the purposes of promoting and achieving the company’s non-profit objectives.

8. What does ‘limited liability’ mean?

The term ‘limited liability’ refers to the reduced financial responsibility of the company owners. A limited company exists as a separate legal entity. Therefore, shareholders and guarantors are only required to contribute the value of their shares or the sum of their guarantee toward debts. Their personal finances are protected beyond what they have invested in shares or guaranteed to the company.

9. What addresses are required to form a company?

Companies House requests the details of a number of different addresses at the time of company formation, some of which will be placed on public record.

  • Registered Office Address: It is required by all limited companies. This is the official address of a company and it must be situated in the country of incorporation – England and Wales, Scotland or Norther Ireland. Statutory correspondence from Companies House and HMRC will be delivered to this address. Registered office details are placed on public record.
  • Service Address: Company directors and secretaries, subscribers (first shareholders or guarantors who form the company) and PSCs must each provide a service address to receive their personal statutory mail from Companies House and HMRC. This can be located anywhere in the world. Service addresses are placed on public record.
  • Usual Residential Address: Directors, company secretaries and PSCs are required to provide Companies House with their residential address details. This information will not be placed on public record unless the address is also used as a registered office or service address.
  • SAIL Address: A single alternative inspection location (SAIL) address is optional. Companies may use a SAIL address to keep their statutory records and make them available for inspection, instead of keeping them at a registered office. A SAIL address must be in the same UK country as the registered office. These address details are placed on public record.
  • Business Address: A business address is optional. A company may use one or more business addresses for correspondence from clients, suppliers, lenders, members of the public and all other third parties. This type of address can be located anywhere in the world. Companies House does not require details of business addresses, nor are these details placed on public record.

10. What documents are required to form a company?

10.1. Company formation agent services

If you incorporate through an online company formation agent, there is no need to sign any paperwork in person or send any documents by post. All necessary information is delivered online.

If you have to provide any supporting documentation for Companies House, you can simply attach it to your online application.

10.2. Companies House Web Incorporation Service

The online incorporation service from Companies House does not require any paper documents in the first instance. However, if you need to send any additional documentation after submission, you will have to post it. Furthermore, if your application contains errors, you will have to resubmit your amended application by post, regardless of the fact you originally delivered it online.

10.3. Companies House postal application

To form a company using Companies House postal application, you will be required to submit the following paperwork:

  • Form IN01 ‘Application to register a company’
  • Memorandum of association
  • Articles of association – unless you choose to adopt unaltered Model articles
  • Supporting documentation if your company name contains any sensitive words or expressions

11. What happens if Companies House rejects my application?

The most common reasons for rejected applications include:

  • Supporting documentation is required for your company name.
  • Supporting documentation has been incorrectly presented.
  • A sensitive word or expression has been included but no supporting documentation has been provided with the application.
  • Director’s details are incomplete
  • A residential property is believed to be a commercial property.
  • Incorrect share structure.
  • An error is detected in a director’s authentication details.
  • A director does not meet the minimum age requirement of 16.
  • PSC information is missing.

The chances of an application being rejected are usually higher if you file an online or postal application directly through Companies House. Amended applications must then be resubmitted by post, regardless of whether the original application was filed online.

By registering a company online through 1st Formations, the chance of rejection is greatly reduced because all applications are reviewed by a specialist agent before being submitted to Companies House. If your application is rejected, we will notify you immediately and you will be able to make the required changes online in a matter of minutes.

If supporting documentation is requested, you can submit this electronically. There will be no additional charge and there should be no significant delay to your company formation.

12. When can my new company start trading?

You can begin trading as soon as Companies House approves your application. If you incorporate through 1st Formations, you will be able start trading within approximately 3 hours of submitting your application.

13. Do I need to tell HMRC when I register a company?

HMRC is notified by Companies House as soon as any new company is incorporated, so there is no need for you to contact HMRC in this instance.

When you start trading, you must register your business with HMRC as ‘active’ for corporation tax purposes. This should be done within 3 months of starting to trade.

If your company is dormant (not trading), you must notify the corporation tax office in writing. You will not be required to register for corporation tax until you begin trading.

14. What company details are displayed on public record?

Companies House maintains an official register with details of all limited companies and Limited Liability Partnerships incorporated in the UK. This information is publicly available to create openness and corporate transparency, reduce tax evasion and money laundering, and eliminate corruption. The public is, therefore, able to monitor the performance of businesses, find out who owns and controls them, and check whether or not they are adhering to their statutory requirements.

Where applicable, the following information will be disclosed on public record:

  • Name of company
  • Previous company name(s)
  • Registered office details
  • Single Alternate Inspection Location (SAIL) address
  • Date of incorporation
  • Nature of the business (expressed by way of SIC codes)
  • Company structure
  • Company status – live, dissolved
  • Insolvency details
  • Key filing dates
  • Annual accounts
  • Annual confirmation statement (previously known as an annual return)
  • Details of directors and secretaries
  • Details of shareholders or guarantors
  • Details of LLP members
  • Details of PSCs

The public register also contains details of all dissolved companies and disqualified directors. All of this statutory information is retained on the register indefinitely. When a company or LLP is dissolved, the information will be archived 20 years after the dissolution date.

By Chris Tapley, Content Writer for 1st Formations.