So, whether you're planning to start a small business or go big time, this is the guide!
What is UK Company Formation, and Why is it Important?
When you form a company in the UK, it's considered a legal entity separate from your assets. This means that your business can own and operate its assets, make decisions on its behalf, and contract with other companies without any interference from you personally.The benefits of company formation include increased financial stability and flexibility and the ability to protect your business from personal liability. In addition, a company can act as a vehicle for growth and expansion, offering opportunities for new investors and greater exposure to market potential.
It's important to understand that not all types of companies offer full protection from a personal point of view. A sole proprietorship entity, for example, is related to you as a person. On the other hand, a limited company is the type that provides more protection and doesn't interfere with you personally.
Reasons for UK Company Formation
There are several reasons, but the main ones include:Increased Control
Forming a UK company provides entrepreneurs with increased control over business decisions, operations, and strategic direction. As directors and shareholders, they have the autonomy to steer the company in line with their vision and goals without external interference.Flexibility
A UK company structure offers enhanced flexibility in terms of ownership, management, and business activities. Owners can adapt to market changes, explore new opportunities, and easily modify the company's structure to suit evolving needs.Legal Protection
By forming a UK company, individuals benefit from limited liability protection, safeguarding personal assets against business debts and legal claims. This separation between personal and business finances enhances security and minimizes personal risk.Market Potential
Operating as a registered UK company opens doors to a broader market. Companies are perceived as more credible and trustworthy, expanding opportunities to attract customers, secure partnerships, and compete on a larger scale.Professionalism
Establishing a UK company conveys professionalism and seriousness to stakeholders. It instills confidence in clients, suppliers, and investors, portraying the business as a reliable entity committed to high standards of conduct and service.Financial Security
UK company formation provides a layer of financial security by enabling access to business banking services, funding options, and investment opportunities that may not be available to unregistered businesses. This stability helps sustain and grow the business.International Reach
Registering a UK company facilitates international expansion by enhancing credibility and trust with overseas partners, customers, and investors. It streamlines cross-border transactions, compliance with global regulations, and establishes a foothold in international markets.Growth Opportunities
A registered UK company is better positioned to capitalize on growth opportunities, such as mergers, acquisitions, partnerships, and expansions. The structured framework and legal recognition pave the way for scaling the business effectively.Financial Stability and Flexibility
With a UK company structure, businesses gain access to various financial tools, including loans, grants, and equity funding. This financial stability and flexibility enable strategic investments, operational improvements, and sustainable growth.Protection from Personal Liability
Forming a UK company shields owners from personal liability, ensuring that their personal assets are safeguarded in case of business-related legal issues or financial difficulties. This protection provides peace of mind and security for entrepreneurs.Benefits of UK Company Formation
There are many benefits associated with forming a company in the UK. These include:
Access to Capital
Forming a UK company provides entrepreneurs with access to a diverse range of capital sources, including bank loans, venture capital investments, and crowdfunding opportunities. This access to capital is crucial for business growth, expansion, and operational development, allowing companies to invest in new projects, research and development, and market initiatives with the financial backing needed to succeed in competitive markets.Tax Reliefs
One of the key advantages of UK company formation is the access to various tax reliefs and incentives offered by the government. These tax benefits can significantly reduce the overall tax liability of the company, leading to increased profitability, improved cash flow, and enhanced competitiveness. By leveraging available tax reliefs effectively, businesses can optimize their financial position and reinvest savings into strategic areas of growth and innovation.Legal Advice
Registering a company in the UK grants businesses easier access to legal advice and support from qualified professionals well-versed in corporate law and regulations. This access to legal expertise ensures that companies operate in compliance with the law, navigate complex legal issues, and safeguard their interests effectively.Public Trading
One of the significant benefits of forming a UK company is the potential to access public trading by listing the company on the stock exchange. Public trading offers companies increased visibility, liquidity, and access to a broad base of investors, facilitating capital raising and growth opportunities.UK Tax System
By establishing a UK company, businesses gain access to the structured and transparent UK tax system, which provides clear guidelines, incentives, and obligations related to taxation. This access enables companies to navigate tax planning, compliance, and reporting requirements efficiently, ensuring adherence to tax laws while optimizing tax positions to maximize savings and profitability.Employee Benefits
UK companies have the advantage of offering attractive employee benefits to their workforce, ranging from pensions and healthcare schemes to flexible working arrangements and training opportunities. Providing comprehensive employee benefits not only enhances employee satisfaction, loyalty, and productivity but also helps attract top talent in a competitive labor market.Professional Help
Forming UK company grants access to a wide range of professional services, including accounting, legal counsel, business consultancy, and specialized expertise tailored to the needs of businesses. This access to professional help allows companies to tap into external knowledge, experience, and resources, enabling informed decision-making, strategic planning, and efficient operations.Creating a UK company offers many advantages, like getting money and expert advice, as well as legal protection and business benefits. These perks boost the company's reputation, help it grow, and make it easier to compete. Next, we'll look at the cost of starting a UK company.
How Much Does It Cost For UK Company Formation?
If you're wondering how much it costs to form a UK company, the good news is that the process is relatively straightforward and costs modest sums of money. In fact, according to Business Secretary Greg Clark, the average cost of company formation in the UK is around £5,000. This amount includes all the necessary paperwork and legal fees required to set up your business and any other associated costs, such as accountants and lawyers.
Creating a company in the UK can be pretty costly, but it doesn't have to be. There are several different options available for company formation, and the costs will vary depending on the type of company you want to form, the state in which you live, and the services you require.
You can also get help with company formation from several professional companies, and many online resources offer advice and tips on the best ways to go about it.
All in all, there is a lot to think about when it comes to company formation in the UK, but by following these simple steps, you will be well on your way to starting your own business!
But before going through, here are the fees you should expect for different ops in company formation in 2024. Make sure you double check the official government website at gov.uk if you’re not sure.
| Service | Online | Paper | Software |
| Company formation | £50 | £71 | £50 |
| Same day formation | - | - | £78 |
| Name change | £20 | £30 | £20 |
| Same day name change | £83 | £83 | - |
| Reincorporation | - | £71 | - |
| Confirmation statement | £34 | £62 | £34 |
| Voluntary strike off | £33 | £44 | - |
| Charge registration | £15 | £24 | £15 |
| Capital reduction via solvency | - | £33 | - |
| Same day capital reduction via solvency | - | £136 | - |
| Capital reduction via court order | - | £33 | - |
| Administrative restoration | - | £468 | - |
Then, there’s a £30 fee for the application to make an address unavailable for public inspection, only doable by paper.
Fees vary slightly based on the company type, hence the necessity to go through all these fees again.
When registering a company in the UK through a service, proprietary fees will most likely apply, too.
Steps For Setting Up UK Company Formation
To set up a UK company, you will need to- Gather Your Full Name and Business Address:
The first thing you'll need is to gather your personal information and business details. You'll need to know your full name, postal address (this can be an office or a home), telephone number, email address and the type of company that you are setting up. - Gather Your Business Information:
You will also need to gather all the information about your business. This includes:- Type of company you are setting up (Sole trader, Limited Company or LLP)
- Name and address of registered office/place where your business is based (if applicable). If there's a registered office, it will be the address where you'll receive all of your official correspondence.
- Name and address of the bank or other financial institution (if applicable) where payments are to be made by cheque/postal order etc.
- Legal name for the company (for example: "Company A Limited" or "Limited Company") whether you are going to be a sole trader, limited company or an LLP (if applicable)
- Apply for your Certificate of Incorporation:
If the type of business you wish to set up requires a company formation certificate, you will need to apply for a Certificate of Incorporation. This is the first step in setting up your business as a limited liability partnership or an LLP (limited liability partnerships are not available in Scotland). You will need to fill out and submit the application form. The document is available from Companies House, HM Revenue & Customs (HMRC), or most solicitors' offices. There are a few rules you need to follow, such as making sure the name doesn’t include official rules like “queen” or “king”, yet you can get permission from a royal body if it’s not related. - Pay Your Company Formation Fee:
Once you have applied for your Certificate of Incorporation, it's time to apply for company registration. This formal process confirms that your business exists and is registered with the relevant authorities. You will need to submit an application form proof of identity, and company registration. The document is available from Companies House, HMRC, or most solicitors' offices. - Apply for Your Company Registration:
Once you have paid the company formation fee and received your Certificate of Incorporation, it's time to apply for company registration. This formal process confirms that your business exists and is registered with the relevant authorities. You will need to submit an application form and proof of identity and company registration. The document is available from Companies House, HMRC or most solicitors' offices. - Agree with Your Company's Articles of Association:
Once company registration has been completed, you will need to agree to your company's articles of association. This document sets out the rules and regulations that govern how the company is run and what it can do.
The articles of association will be set out in a document called your Memorandum & Articles of Association (M&A). This document is prepared by you or an attorney and should detail:- The name of the business
- Where it is based
- Who its directors are
- What the company does and how it will be run
- Register Your Company:
Once you have completed the above steps, your business should now be registered with Companies House. This means that you can use various services such as opening bank accounts, applying for credit cards and insurance policies, and registering your business name with the Intellectual Property Office (IPO). - Make a Start:
Once you have registered your business, it's time to get started. The next step is to set up a bank account and open an insurance policy to protect the company against loss of profits or damage caused by its employees. Once this has been completed, you can then start trading. - Register Your Trademarks:
You will also need to register your trademarks with the IPO for them to be protected against infringement by other companies. The process is relatively simple, and you can do it yourself or pay a solicitor's fee (around £150). However, you will need to register your trademark if you intend to use it in the UK. If you have registered a trademark abroad, this process can be completed online at www.ipo.gov.uk. - Register Your Business Website:
Before you can start advertising your business, a website must be set up. This will enable customers to view the company's products and contact details online. Registering a domain name with the Internet Corporation for Assigned Names and Numbers (ICANN) is reasonably simple and can be completed at www.icann.org/en/domains/. - Get Legal Advice:
Once the above steps have been completed, you should be ready to start advertising your business. But, a lawyer must be consulted to ensure that your rights are protected from infringement by other companies. - Get Organised:
Once you have registered your business, it is crucial that you get organised. You will need to set up a bank account for the company to receive payments from customers and suppliers and save receipts so that invoices can be paid out. - Get Started:
Finally, it is time to start advertising your business. It would be best to advertise in local newspapers and on the Internet and send out a few press releases to local businesses (such as those at work) about your new company.
Services That Can Help in Setting Up UK Company Formation
Several services can help set up a company in the UK. These include:- Legal & Accounting Services:
Many lawyers and accountants offer company formation services, including setting up your business bank account, preparing your tax returns, and providing advice on how to register your business name. - Companies House:
Companies House is responsible for registering companies in the UK, maintaining a list of all registered businesses, and providing information on company formation requirements such as filing accounts, paying taxes, etc. It can be accessed at www.companieshouse.gov.uk - The UK Business Gateway:
The UK Business Gateway is a website that provides information on setting up a business in the UK and providing support with registering your company, filing taxes, and marketing your business. - The Federation of Small Businesses:
The Federation of Small Businesses (FSB) provides a range of services to small businesses, including company formation advice and support. It can be accessed at www.fsb.org.uk - The Association of British Insurers:
TThe Association of British Insurers (ABI) is the trade body for UK insurers, including those that provide company formation services. It can be accessed at www.abi.org
TOP 10 Best UK Company Formation Services
- Rapid Formations
- Company Formation made Simple
- Globalization Partners
- Smart Formations
- Your Company Formations
- 1st Formations
- Quality Company Formation
- Mint Formations
- The Formations Company
- Crunch
Rapid Formations
Rapid Formations offers a full package, as the name is self-explanatory. Not only do you get to register a company in no time, but you’ll also get support in opening a business bank account, not to mention associated services to stay compliant. Everything you need is conveniently available in one place.
Companies Made Simple
Companies Made Simple offers four different packages, ranging between £54 and £159. Each package has its own particularities. The top one also offers digital company documentation, a registered office address, confirmation statement filing for the first year, and mail forwarding, among others.
Anna Money
Similarly, Anna Money offers more packages for business formation in the UK, with extras like added privacy or tax support. The primary purpose of the company is to offer business account solutions. However, company formation is also among these things. Each package has its own benefits.
Smart Formations
Smart Formations offers starter, printed, privacy and business packages, each with its own specs. You can also use this service to register any type of company and not just a limited one. Furthermore, the service offers access to the right to manage companies as well. No matter what you’re after, chances are you’ll find it here.
Your Company Formations
Your Company Formations offers excellent value for money. Believe it or not, company formation services start at just over £2. Obviously, a higher package will come with more extras and benefits. You'll gain access to a team of experts, an approved agent, an easy process, and even cashback rewards.
1st Formations
1st Formations offers quick company formation, with the quickest package able to give you a new company in as little as three hours, assuming you make the request on a working day and within working hours. Even the all-inclusive package is cost-effective, offering access to a registered office in London, VAT registration, and so on.
Quality Company Formations
Quality Company Formations has a basic package that also includes a bank account, all the fees required to register the company, access to an online portal to manage it, a free .com or .co.uk domain name and all the certificates you require. It sounds like the perfect option, but the fully inclusive package also helps with taxes and other formalities.
Mint Formations
Mint Formations provides a wide variety of services. You don't even need to be in the UK to get a company registered, as some services are available to non-UK residents, too. There are five different packages to choose from, with the lowest going for less than £5. Registration can be done in as little as a day.
CountingUp
CountingUp isn’t specialized in company formation, but mainly in accounting services for businesses. However, company formation is also a service. It’s offered as an extra. Basically, if you purchase a different service, it may be offered without any fees whatsoever. It’s important to ask about it upfront though.
Crunch
Similarly, Crunch is specialized in online accountancy, but company formation goes hand in hand, so it’s offered as an extra service too. Registering a company is a matter of hours, while costs range around £50. Check name availability on its website and proceed with the registration from there.
Best Banking Services For UK Company Formation
Several banks offer good banking services for companies, which can include:- Wise
Wise is a leading UK bank that provides an online banking platform for businesses. It can be accessed at www.wisebankonline .com - First Direct
First Direct offers a range of services to companies, including company formation and business accounts tailored specifically for small businesses. It can be accessed at www.firstdirect.co.uk - Stripe
You can use Stripe to accept payments from customers and clients and make online purchases. It can be accessed at www.stripe.com - PayPal
PayPal is a leading payment processor for businesses in the UK that allows you to receive payments from customers and clients through its online platform. It can be accessed at www.paypal.com - 2Checkout
2Checkout is a leading UK payment processor that offers services to businesses, including company formation and business accounts. It can be accessed at www.2checkout.com
Which Type of Business Structure do you Think is Best for Starting a Company in the UK (LLC, Ltd, LLP)?
There is no single answer to this question, as it depends on the specific needs of your business. You may want to consider the type of products or services you offer, the size and complexity of your operation, and whether you plan to expand into new markets or contract with other businesses.LLC
An LLC is a limited liability company (or "Sole Proprietorship") that allows the business owner to be protected from personal financial losses in case of lawsuits or other legal problems. The main benefit of this structure is that the business owner is not personally liable for any debts or obligations of the company.LLC Benefits
- In an LLC, only members are legally responsible for their liabilities and debts. The owners do not have to worry about their assets being at risk if the company goes under.
- An LLC is a pass-through entity, meaning that it does not pay any taxes itself but instead pays its profits or losses to its owners on their tax returns. This means that an LLC owner does not have to worry about paying taxes on the business's income.
- An LLC can be formed by a single individual or several individuals working together for their benefit. There are no minimum requirements in terms of net worth and the number of members required to form an LLC.
- An LLC has the same tax benefits as a sole proprietorship, with one exception: it is not subject to self-employment taxes (Social Security and Medicare). Instead, members of an LLC only pay income taxes on profits distributed to them during the year by their business.
Ltd
A limited company is a type of business organisation that offers many of the same benefits as an LLC but with some additional features. Like an LLC, a limited company can be formed by one or more individuals, and it does not have to have any minimum memberships. However, unlike a sole proprietorship or partnership, where owners can be personally liable for business debts, in a limited company, the owners' liability is typically limited to the amount they have invested in the company. This protection helps safeguard the personal assets of the owners if the company encounters financial challenges.Ltd Benefits
- A limited company is not a pass-through entity like a partnership or an LLC. Instead, a limited company is a separate legal entity responsible for paying taxes on its profits. The owners of a limited company are taxed on any income they receive from the company, such as dividends or salaries.
- Similar to an LLC, a limited company offers flexibility in its formation requirements, allowing for creation by one or multiple individuals. This structure provides opportunities for collaboration and shared ownership within the business.
- A limited company is also considered an "S" corporation and will pay taxes as such on its profits (subject to certain limitations). This means that it has the same tax benefits as an LLC but with some additional features.
LLP
LLP (Limited Liability Partnership) is a business entity that can be formed by a group of individuals who want to share the liability for their debts and operations. It is also known as an "L" or LLP, where L stands for a limited partnership.LLP Benefits
An LLP can be formed with any number of individuals and does not have to have a minimum membership.
Like a limited company, an LLP is considered an "S" corporation for tax purposes. This means that it will pay taxes on its profits (subject to certain limitations) and can also take advantage of some additional benefits, such as the ability to issue stock and receive dividends.
What should be Your Top Priority When Starting a New Company in the UK?
When starting a new company in the UK, your number one priority would be to get registered with Companies House. This is mandatory for all companies, regardless of their size or type, and will help you keep track of your company's essential filings, such as annual accounts and changes to your company's name or registered office.Moreover, getting registered with Companies House will allow you to take advantage of the many benefits offered by being a company, including:
Tax advantages:
Being a company gives your business access to certain tax breaks and exemptions not available to sole traders or other unincorporated businesses. For example, if you are a sole trader, your profits and losses will be subject to self-assessment tax. However, if you register as a company, these same profits can be offset against corporation tax (currently 20% of the first £1 million) or income tax (up to 45%).In addition, if you are a company and your taxable profits exceed the tax-free allowance of £5 million per year (or £1.75 million for a small business). Any additional income is taxed at 28%.
Access to grants:
If your business needs some help with funding, then there are several different sources from which you can apply. For example, the Small Business Service is a government department that offers grants and loans to small businesses in need of financial assistance.Access to funding:
If you need capital to start up or expand your business, you can apply for a loan from the UK government's Business Bank. This is an easy and hassle-free way to get funding for your company, especially if you need finance on short notice.Access to training:
If you need some professional advice or help with a specific skill, consider attending one of the many free training courses offered by the government. This can save you much money in the long run, especially if you are looking to employ someone already trained for that particular job.
Exemption from VAT:
If you are a company, your business will likely be exempt from paying UK Value Added Tax (VAT). This means that the cost of all goods and services purchased by your company can be deducted from its taxable profits. In addition, if you buy any goods or services from other companies, you can claim back VAT paid on those purchases against your total taxable profits.Access to legal services:
A common problem for start-up companies is that they are often unaware of their legal obligations. This can cause problems if you need to enforce a contract or take legal action against someone who has breached it. However, many solicitors and law firms will offer their services to small businesses at very reasonable rates.Access to technical support:
Many different companies offer technical support for various products and services. For example, the British Telecom Business Support Service provides free telephone advice to small businesses.Access to business coaching:
Suppose you are looking for some professional advice on how to run your business, then consider hiring a business coach. This can be a beneficial service for making sure that all of the different areas of your company's operation are running smoothly.Accountancy and financial advice:
Companies are required by law to keep accurate records, which can be expensive for small businesses. However, many accountants and other professionals will offer their services reasonably. In addition, many financial institutions will provide free advice and guidance on managing your company's finances.Tips for people that want to start their own company in the UK but don't know where to begin
Here are a few tips for people who are thinking about starting their own company in the UK:Talk to your family and friends:
Many people have started their businesses without any formal training or help. If you can get some initial advice from people that you know, then this will be a big help in getting started.Do your research:
Before you even start thinking about starting your own business, you need to research the different types of companies currently operating in your area. This will help ensure that you don't create a company with minimal potential for success.Get experience:
If you are thinking about starting your own company, it is good to get some experience under your belt before doing so. This will help ensure that you don't end up having to start the business from scratch when all of this initial research has already been done for you.Be prepared to spend some money:
If you want your business to be successful, then there is no way that it can succeed without a significant investment of time and energy. This means that if you are thinking about starting your own company, then it would be prudent for you to consider spending some money on getting some professional help to make sure that everything is done properly.Be realistic about what you can achieve:
If you are thinking about starting your own business, it is essential that you don't set yourself up for failure. If this happens, there will be no point in even trying to start the company because all of the work and effort put into it will have been wasted.Be prepared to take some risks:
If you are planning on starting your own company, then there is no way to do this without taking some risks along the way. This means that if you want to create a successful business, you will need to be prepared to take some risks.Final words
If you are thinking about your own UK Company Formation, then it is vital that you do much preliminary research before doing so. This will help ensure that all of the work and effort to create this company can be used to its maximum potential.It also means that if your plan does not work out, you will not be forced to go through the whole process again. Therefore, it is essential that if you are thinking about starting your own business, you follow all of these steps to make sure that everything goes as planned!
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