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UK Company Formation
If you're thinking of starting your own company in the UK, this is your guide! This comprehensive guide will cover everything you need to know about company formation, from legal requirements to financial considerations. We'll also provide tips and advice on choosing the proper business structure and walk you through registering your company with the relevant authorities. 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.

Reasons for UK Company Formation​

There are several reasons, but the main ones include:
  • Increased Control:
    As a company, you can take advantage of the support and resources that an individual or partnership would not be able to access as easily. For example, companies can often benefit from training in marketing and finance, which could help them grow more quickly.
  • Increased Flexibility:
    As a company, you can take advantage of the benefits that an individual or partnership would not have access to as efficiently (for example, offering flexible working arrangements). This means that your business is more versatile and can grow differently than an individual or partnership.
  • Increased Legal Protection:
    As a company, you can take advantage of legal protections that an individual or partnership cannot access as efficiently (for example, limited liability protection). This means that your business can take on more significant risks and grow more quickly than an individual or partnership would be able to do so.
  • Increased Market Potential:
    As a company, your business can take advantage of the UK's favourable market conditions and expand more quickly than an individual or partnership would be able to do on their own. For example, businesses are often eligible for tax breaks when they grow and benefit from the UK's favourable business environment.
  • Increased Professionalism:
    You are likely to have a more professional image than an individual or partnership would as a company. This could mean that your customers are more likely to trust and respect you, leading to increased sales.
  • Increased Financial Security:
    As a company, you can access funds that would not be available to an individual or partnership if they were starting their own business. This means that your business can grow more quickly than an individual or collaboration without having any financial risk associated with it.
  • Increased International Reach:
    As a company, you can grow your business internationally by taking advantage of the UK's membership in international trade bodies and organisations. For example, companies can take part in global supply chains, which could help them access new markets for their products or services.
  • Increased Growth Opportunities:
    If you are starting a company in the UK, you have access to several growth opportunities that may not be available to you if you were starting a business independently. For example, companies can take advantage of tax breaks and government grants, which can help them grow more quickly.
  • Increased Financial Stability and Flexibility:
    A company is a legal entity with its assets and liabilities, meaning that it can operate independently from your finances. This increases your financial stability as your business can survive even if you have a terrible year. It allows your business to make decisions that are in its best interests.
  • Increased Protection from Personal Liability:
    Being an independent legal entity, the company is also protected by corporate law, limiting what can be done on behalf of the company. For example, suppose you are running the company's finances and signing off on payments. In that case, this is considered acting in a personal capacity - something that would not happen if it were an individual doing these things.

The Benefits of UK Company Formation​

There are many benefits associated with forming a company in the UK. These include:
  • Access to Capital:
    As a company, you will be able to access capital from investors and lenders who are willing to provide this type of funding. This could include the ability of these types of people or institutions such as banks to provide you with loans.
  • Access to Tax Reliefs:
    As a company, you will be able to take advantage of many tax reliefs associated with being an individual or partnership, such as the annual investment allowance (AIA), which is available for qualifying investments up to a maximum of £200,000 per year.
  • Access to Legal Advice:
    As a company, you will be able to access legal advice from accountants and lawyers who specialise in helping companies with their business affairs such as tax planning, accounting and compliance issues etc. This could include the ability of these types of people or institutions, such as accountants and lawyers, to provide you with advice on your business structure.
  • Access to Public Trading:
    As a company, you will be able to offer your shares on an ongoing basis through public trading (subject, if applicable, to any restrictions imposed by law). This could include the ability of these types of people or institutions such as stockbrokers and online trading platforms to provide you with this type of funding.
  • Access to the UK Tax System:
    The main benefit of forming a company in the UK is that you can access all of the benefits associated with being an individual or partnership. This includes accessing tax reliefs, including capital allowances and business rate discounts. It also means that you can take advantage of all the benefits associated with being a self-employed individual or partnership.
  • Access to Employee Benefits:
    As a company, you will be able to offer your employees benefits such as pension schemes, holiday pay and sick pay. This could include the ability of these types of people or institutions, such as employers' benevolent funds (EBFs), to provide these benefits to your employees.
  • Access to Professional Help:
    As a company, you are likely to have access to more professional help than an individual or partnership. This could include using the services of accountants and lawyers who specialise in helping smaller businesses.
  • Access to Corporate Benefits:
    As a company, you will be able to take advantage of many corporate benefits. These include access to tax reliefs associated with being a limited liability partnership (LLP). This consists of the ability for your business partners and shareholders to enjoy unlimited personal liability and unlimited personal liability for any debts that your business may incur.
  • Access to Financial Assistance:
    It gives you access to financial assistance from government agencies such as HM Revenue and Customs (HMRC). This could include access to the Enterprise Investment Scheme, which allows you to invest in a business and receive tax relief on any profit made. It also provides access to other financial assistance, such as grants from HM Treasury.
  • Access to Private Placement of Shares:
  • As a company, you will be able to offer private investors the opportunity to invest in your business through the issue and sale of shares on an ongoing basis (subject, if applicable, to any restrictions imposed by law). This could include the ability for these types of people or institutions such as banks and high street brokers to provide you with this type of funding.

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!

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.
  • Pay Your Company Formation Fee:
    Once you have applied for your Certificate of Incorporation, it's time to pay the company formation fee. This is a one-off payment of £125 (or US$200), which covers the cost of your Certificate and any other associated costs such as a copy of your passport or identity card, stamp duty etc.
  • 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 which 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:
    The 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​

  1. Rapid Formations, Company formation from £12.99
  2. Company Formation made Simple starting from £14.99
  3. Globalization Partners, make your workload easier
  4. Smart Formations, Register your company quickly and easily for as little as £9.99
  5. Your Company Formations, Made effortless, from £12.48
  6. 1st Formations, Simple company formation in the UK from £12.99
  7. Quality Company Formation, Limited company formations in the UK from £11.99
  8. Mint Formations, Register your new UK Limited Company Today
  9. The Formations Company, start your limited company from just £9.99
  10. Crunch, value with a Limited Company formation in the UK

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
There are many other options, but the above are the most popular for UK companies.

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 an LLC, the liability of a limited company is not limited to its owners. The owner will be liable for the company's debts, but the owners will not be liable for their assets.

Ltd Benefits
  • A limited company is a pass-through entity, meaning that it does not pay any taxes itself. Instead, the profits or losses of the company are passed along to its owners on their tax returns.
  • As with an LLC, a limited company has fewer requirements for formation than other types of businesses. It can be formed with a single individual or several individuals working together for their benefit.
  • 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
  • Like a limited company, an LLP offers the benefits of being a pass-through entity. The profits or losses of the business are not taxed at the LLC level but instead passed along to its members on their income tax returns.
  • An LLP can be formed with any number of individuals and does not have to have 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.

If you are to start a new company in the UK, what would be your number one priority?​

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). It means that the cost of all goods and services purchased by your company can be deducted against 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 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 that 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.

Conclusion​

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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sonato

Offshore Agent
Mentor Group Gold
Thanks for this nice share, good read, enjoying many of your articles Sir!
 

burden

Active Member
enjoy reading, I didn't find it complicated to setup my UK LTD's at all. But for someone new to all of this it's easy to learn from your above article.
 

bonox

Corporate Services
Silver Member
Mentor Group Gold
Business Angel
You can just pick one, but the essence in all of this is to find a provider that also can help with nominee services, accounting, substance and everything else you may need if trouble comes.
 

AMD

Offshore Agent
Mentor Group Gold
setting up a UK LTD isn't complicated, the difficult part is to find a trustworthy service provider that respond in a timely manner.
 

tacokai

Mentor Group Gold
Can someone tell me, why would a group of people take the risk and liability for a LLP ?

I have seen many around claim it's better for banking and privacy, but if you will be liable to whatever is going on in the company by person, it may not be worth it?

That is a very good guide for all noobs interested in general information.

The guide they have inside mentor group gold is better
yeah, it is a good guide and explains much more about different things i.e. banking, payment processing etc.
 

IBO Panama

New member
Hi, I have a UK LLP that is dormant and haven't been used, I need to file.
Is there any way that i can have this filed myself?
 
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