So, you’re thinking about forming a company, but don’t know where to start? Don’t worry, we have got you covered.

Forming your own company is a tax-efficient way to run your business, allowing you to shape your own brand and own everything you do. But what are the steps you need to take?

In this article, we will give you a step by step guide on how to start a company in the UK. Let’s get started.

What Is A Company?

A company is a legal entity that runs on a day to day basis by those who created it, engaging in and operating it in an industrial or commercial capacity. There are many different types of companies, but in the UK, the most common type is private company limited by shares.

What Are The Benefits Of Forming A Company?

Setting up a company does require more work than registering as self-employed, however, there are plenty of benefits.

Just some of the benefits of registering as a limited company being likely to paying less personal tax than if you stayed as a sole trader. As a director of your company, by giving yourself a smaller salary, you can take a higher income from shareholder dividends.

Also, your business will have its own distinct entity, completely separate from you. Everything held in the company name, such as loans and assets are completely separate from those of the company shareholders. So, your own personal assets are protected if for whatever reason the business folds.

How Do I Form A Company?

Companies are formed by filing out documents with the Registrar of Companies at Companies House, all in line with the company law: the Companies Act. To be an official business, a certificate of incorporation for the company will need to be issued.

The required documents to be filed with Companies House are as follows:

Form IN01, includes basic company information such as company name etc.
Memorandum of Association.
Articles of Association.

How To Choose A Company Name

Your company name should be top of the list of priorities when forming a company. However, you can’t just use any name, before you commit and make your final decision, you should check the table below, as you many end up choosing a name that will be rejected by the Registrar of Companies.

Things To Avoid	Things To Consider
Using the same name, or similar sounding name to another company.	Private company names need to end with the word “Limited”.
Using names that suggest a connection with local authorities or the government.	Research existing trademarks to avoid getting in to trouble.
Using any sensitive or offensive words (check this list).	Check the domain name for your chosen name is available.
Using non-alpahbetic characters such as & due to not being useable onyour website address.	Create a shortlist of name, just in case you are not be able to use the name at the top of your list.

3 Tips To Naming Your Company

Avoid names that are hard to spell

You want your potential customers to be able to look up and find your company easily online. If they get confused about how to spell the name of your business, they might not be able to find more information about you and your services.

Similarly, when customers or your business partners share news related to you, they might misspell your name. That is why you should keep your company’s name simple!

Do your research

Before you pick a name, make sure to do thorough research online to make sure that no one else is using this name. Your business’s name should be unique so that you can stand out from your competitors.

Moreover, if you choose a name that someone else uses already, customers might confuse your companies.

Pick the .com domain for your website

Creating a website for your business should be the next step after picking the right name. When you go through the process of doing it, you will have to pick an extension.

There are several options to choose from, but you should always go for ‘.com.’ This extension is the most memorable and the most commonly used.

Shareholders

Being able to map out the ownership structure of your business through shareholders is one of the many benefits of forming a company. But how does this all work?

Well, there are some things you need to know about shareholders. Firstly, your company is required to have at least one shareholder, holding at least one share of £0.01 However, there are no restrictions on the number of shares, shareholders or the denomination of shares.

A good tip is to consider having different classes of share. By having the option of different classes of shares, there will be different rights for different shareholders. This can include voting, dividends and having the ability to transfer shares. If you are looking to attract private investment, this is an option for you.

Directors

Directors are possibly the most important components of any company. The people who carry out the everyday management of a company are called the board of directors. If you are forming a company, decisions of who are the initial directors of the company need to made. Some of the rules and advice that apply for directors are:

Directors must be at least 16 years old.
There are no nationality or residence requirements in English law for directors.
The minimum requirements for number of directors usually two.
There are no limitations to the maximum number of directors a company can have, however it may be inconvenient for small companies to have high numbers of directors.
It is recommended to have directors’ and officers’ insurance. This will protect directors from claims of wrongdoing.

Record Keeping

When it comes to record keeping, there are certain things bout your business that need to be noted. If you keep the records somewhere other than your company’s registered office address, you must inform Companies House.

Records you must keep include:

Accounting and financial records.
Shareholders, directors and secretaries.
Results of votes and resolutions between shareholders.
Loans including payment dates and who it will be paid to.
Indemnities, promises your company makes for payments if something goes wrong and it’s the company’s fault.
Transactions of anyone buying shares in the company.
Mortgages or loans secured against your company’s assets.

It is recommended to hire a professional, such as an accountant that will help your business with tax. HM Revenue and Customs could run a compliance check on your company, making sure the right amount of tax is being paid.

Below we have created a table listing all the information that needs to be added to your records. You need to add people with significant control, accounting records and finanacial records,

Registering People With Significant Control	Accounting Records	Financial Records
Must include anyone with over 25% shares or voting rights in your company.	Must include any all money received and spent by your company, such as any grants and payments from any coronavirus support schemes.	Must include all money spent by your company. This includes receipts, petty cash books, orders and delivery notes.
Must include anyone that can remove or appoint a majority of directors.	Must include any details of assets owned by your company.	Must include all money received by your company. This includes invoices, contracts, sales books and till rolls.
Must include anyone that can control your company.	Must include any debt that your company owes or is owed.	Must include any other relevant documents, such as bank statements and correspondence.
	Must include any stock your company owns at the end of the financial year.
	Must include any stocktaking’s you used to work out the stock figure.
	Must include all goods bought and sold.
	Must include who you bought and sold goods to and from. (unless you run a retail business)

If you fail to keep your accounting records, there could be a fine of £3,000 by HMRC or even the possibility of being disqualified as a company director.

How Long Does My Business Need To Keep Records For?

6 years. Company records must be kept from the end of the last company financial year they relate to. Records can be kept for longer for the following reasons:

There is a compliance check into your Company Tax Return started by HMRC.
You have submitted your Company Tax Return late.
Your records show a transaction that covers more than one of the company’s accounting periods.
Your company has purchased something that you expect to last over 6 years. An example could be machinery or equipment.

Memorandum And Articles Of Association

When it comes to forming your company, there are two things you need, a memorandum of association and articles of association.

A memorandum of association is a legal statement that is signed by all initial shareholders or guarantors that agree to form the company.
Articles of association are written rules about running the company. The shareholders or guarantors, directors and the company secretary all agree on these rules.

You don’t need to write your own memorandum of association if you decide to register your company online. Once the company has been registered, the memorandum cannot be updated.

As part of your registration, it will be created automatically. If you are registering by post, you can use this template.

Registering Your Company

To register your company, you will need to register the following:

Company address
SIC code

Typically, people can register for Corporation Tax while registering with Companies House. If you can’t, simply register separately with HMRC once you have registered your company with Companies House.

How Much Does It Cost To Form A UK Business?

This figure of course will depend on the type of business and how much you intend to invest in your company. However, if we look at the typical figures, £55,000 is the average UK startup budget. A study by Geniac found that usually, in their first year, UK startups will spend £22,756.

What Are The Expenses When Starting A Company?

With only 42.4% of SMEs surviving longer than 5 years, keeping costs down in the beginning is key. But what exactly are the costs when forming a company? Some examples of start up expenses include:

Registering fees – This is the one time fee that is paid when choosing your
company formation type.
Marketing – When trying to advertise your business, logo design, advertising and website hosting will all add up.
Recruitment – Hiring new staff and advertise vacancies on job boards will be a cost when looking to expand your business.
Professionals – This is the costs for professional help, such accountants and advisors when registering your business with Companies House.

How Long Does It Take To Register A Business?

Subject to Companies House, in the UK, setting up a private limited UK company can be done in just 24 hours online. Registering a branch of your existing company will take up to 4 weeks.
If you want to begin trading straight away, within 3 months your company is required to register with HMRC for corporation tax.

What Happens Once I’ve Registered A Company?

Once you have registered your company, within two months you are required to issue a Share certificate to each shareholder. This is evidence of shares to each shareholder. This can then be used as proof of shares if they are removed from the company’s internal Register of Members.