Forming a limited company
You and your friends are forming a limited company for a new business venture. Aside from the potential tax savings (see here), what are the other important points to consider?
Forming a limited company: methods to form a company
Probably the first decision is the method of forming a limited company. This can be done in three different ways:
The simplest way is either paying a company formation agent (such as CompaniesMadeSimple) or having your accountant form the company.
Forming a limited company: choosing a company name
When forming a limited company, one of the primary decisions will be the company name. As a result, when deciding on a company name you'll need to consider the following:
Additionally, we’d recommend you check the trademark register to ensure you aren’t infringing an existing trademark.
Furthermore, if you’re developing an online business presence and you don't own the website domain for your company name check it's available. Then, get it registered as soon as possible! You can check Names,co.uk to ensure the URL is available.
Forming a limited company: registered address
The next step when forming a limited company is deciding on your company’s registered address. This is where all official Companies House and HMRC correspondence is sent.
The address must be:
If you don’t want your home address to be visible then you could use a third party address such as a managed office or a specific registered office service.
Alternatively, you could use your home address .However be aware this is publicly visible on the Companies House register. Additionally, if you are renting a property you may require your landlord’s permission first.
Forming a limited company: shareholders
When appointing shareholders you need to consider the following:
Additionally, you’ll need to decide how many shares are issued (1 or 100 is usual). However, we tend prefer 100 as it gives more flexibility if you issue shares to someone else later. Plus you'll need to decide the nominal value per share. The value of £0.01p share is often used for simplicity.
Furthermore, depending on who’s going to be a company shareholder and their role, consider using different share classes. You can read about alphabet shares here.
If you don’t include other shareholders on formation you can always issue new shares at a later date or transfer existing shares (if more than one share issued on formation) . For guidance on this see our earlier blog here.
Moreover, where there are third party investors or differing interests in place we recommend you have a shareholders agreement in place.
You could include your family members as shareholders when you form the company. Although there are potential tax issues where shares are issued to your spouse or children.
Forming a limited company: directors
Last and by no means least, the company will need to appoint directors. Directors are legally responsible for running the company and filing all necessary accounts and returns. Moreover, these are legal duties and directors can be fined if these aren't carried out properly!
It's mandatory for a company to have at least one director who:
Another company can act as a director, but you must have at least one real person as a director.
Following registration, directors’ names and home addresses are publicly available on Companies House. Although you can avoid having your home address visible if you use a service address.
Finally, A private limited company doesn’t need a company secretary. Furthermore, most companies formed now only have one or more directors – and no company secretary.
For more useful information, check out our Ebooks here.
And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].
Alternatively, please feel free to complete our Business Questionnaire here.