Registering with Companies House is known as incorporation, and it’s often the first step to setting up your business. Choosing to register a limited company can lend a degree of professionalism to your business, but comes with extra work and responsibilities.
Read on to find out whether it’s right for you and your business.
Is Incorporation the Best Option for Me?
Before registering as a company, you may want to consider setting up as a sole trader. If you are the only decision maker in your business, you can register as self-employed and declare profits as part of your income. It’s straightforward and doesn’t require additional paperwork.
The main benefit of registering as a company is that it limits liability. Any debts racked up are the company’s, rather than your own. This can be particularly helpful if you have a business that costs a significant amount upfront, like a furniture shop.
The other key benefit is that incorporated businesses are charged Corporation Tax, which is currently a flat rate of 20%. Income Tax, on the other hand, is tiered – so as a sole trader you might have to pay 40% or upwards. Learn more about Corporation Tax in our guide here.
Check Your Company Name
Your company name cannot be the same as another registered company, so search Companies House before you apply. This includes punctuation, common words and various spellings, so you may have to add words or make up a completely different name. You can always trade under a different business name as long as you disclose it and it isn’t already trademarked.
Your name will need to end in Limited or Ltd, although you can also opt for Cyfyngedig or Cyf in Wales.
Some words are considered sensitive, and you will either need to avoid them or ask permission to use them. Check the government’s list of sensitive words here.
See also: Contract Eye – https://www.contracteye.co.uk/
Decide On Your Registered Office Address
Your registered address is where important correspondence will go, so you will need to have regular access. More pressingly, it’s publicly available and searchable – so you may want to consider working with an accountant or forwarding company rather than listing a residential address.
The address must be a physical location and in the same country as your company – so if you are registered in Scotland, you must have a Scottish address. This is because the law varies between England and Wales, Scotland and Northern Ireland. Once you register in one country, you must keep an official address there.
Determine Your Nature of Business (SIC)
Your SIC, short for standard industrial classification of economic activities, describes what your business does. You can select up to four, and change them if necessary.
Some examples of SIC codes are:
- 90010 – Performing arts
- 46420 – Wholesale of clothing and footwear
- 70210 – Public relations and communications activities
You can search accepted SIC codes here.
Appoint Your Company Directors
Your company needs at least one director. As a director you have a duty to act in the best interests of the company and to declare any conflicts of interest; you’re also legally responsible for running the company.
You will also have to register for Self Assessment with HMRC and file a tax return every year.
Directors must be at least 16 years old, give their consent and not have any court proceedings made against them (for example, being an undischarged bankrupt).
Appointing joint directors can help to share the workload, but also means that you personally have less control of the company. Instead, you might consider appointing a company secretary.
Provide a Statement of Capital
Limited companies belong to their shareholders. Your statement of capital simply says how many shares exist in your company, how much they are worth and who holds them. You can declare as little as one share for £1.
If you do have shareholders, you will need to give their names, addresses and some security details.
Make Your Memorandum and Articles of Association
The memorandum of association is a legal statement signed by all of the initial shareholders of your company. It confirms that you have all agreed to form the company.
The articles of association are written rules for running the company, agreed by directors, shareholders and the company secretary.
Register and Pay the Processing Fee
Once you have all of your details in order, you’re ready to register online. It costs £12, paid by debit, credit or PayPal, and takes roughly 24 hours.
If you prefer, you can also register by post – it costs £40 and takes 8-10 days.