Frequently Asked Questions
- What is a private limited company?
- A private limited company is a business structure where the company is owned by the shareholders. Directors are appointed to run the company on behalf of the shareholders; however in small businesses these are likely to be the same people. Importantly, with a private company limited by shares, the shareholders’ liabilities are limited to the cost of their shares, i.e. limited liability. This differs from the sole trader structure whereby the sole trader’s personal assets are at risk. When trading as a company you will need to comply with rules laid out in the Companies Act.
- What are the advantages of trading as a limited company?
- There can be some clear advantages of trading as a limited company. Importantly, the shareholders will have limited liability, meaning that they are only liable for the debts of the business up to the value of their share capital. There can also be tax advantages for some individuals by undertaking effective remuneration and dividend planning. Trading as a limited company also has a perceived value and can give the impression to customers or others that the business is established and larger than it actually might be. However these advantages aren’t important for all new businesses. Therefore if you are unsure about whether you should incorporate a limited company, our support team will be happy to help.
- What official documentation does a limited company have to retain after incorporation?
There are three main sets of documentation that a private limited company has to concern itself with.
- When a limited company is formed, Companies House issues them with a Certificate of Incorporation to certify the valid existence of the company. This Certificate states the name of the company, their country of registration, their company number and the date they were incorporated. If you change the name of your company after you have incorporated it you will be sent a new certificate by Companies House with the new name, however your company number will stay the same until the company is dissolved.
- When you apply to register a limited company you will need to provide Memorandum and Articles of Association. These set out the manner in which the company is to be structured and governed. If any changes are made to the articles, Companies House must be informed. There are criminal and monetary penalties if you fail to do this.
- You are required by law to keep an up to date version of your Company Register. This details information regarding the members, subscribers, directors and company secretaries of the company, plus will contain the original minutes of all board meetings and shareholder resolutions. Along with these core documents there may be other documentation that your company has, for example share certificates if they have been issued.
- How can I incorporate a limited company?
A limited company can normally be set up in three ways:
Directly with Companies House
You can complete your company formation through Companies House by registering your private limited company online. This method uses the model Articles of Association and costs £15.00. If you want to form your company through Companies House using your own Articles of Association you will need to complete the relevant Companies House form and send it to Companies House on paper.
Using a Formation Agent
If you complete your company incorporation using a company formation agent, such as Wisteria Formations, you will usually have to fill in a simple online application form. The company formation agent will check your application and submit it to Companies House for you, meaning that you don’t have to spend time finding suitable Articles of Association to use. The company formation agent will also be able to provide you with other services such as hard copies of your company documents should you require them. If you are looking to form a limited company with the most basic package, company formation agents usually cost little more than if you did it yourself; for example Wisteria Formations' basic service costs just £24.99.
Using an Accountant or Lawyer
The final option is to go to an accountant or lawyer who will complete the company incorporation for you. This will be the most expensive option as they will usually charge for both the cost of the company formation and additionally for their time taken completing it.
Wisteria Formations benefits from being part of Wisteria Chartered Accountants. This means that your company can be formed quickly, efficiently and inexpensively using Wisteria Formations. However you still have the security in knowing that Wisteria Formations are part of a firm of Chartered Accountants and you will therefore receive a high quality and professional service.
Wisteria Formations is also a member of The Association of Company Registration Agents (ACRA) which actively engages in discussions with Companies House, HM Treasury and HM Revenue & Customs ensuring a professional and high quality service.
- What information will I need when applying for my limited company formation?
There are a few key items of information that you will need when setting up your company with us. These are:
- Company name
- The package and additional products and services you require for your company formation
- A UK registered office address
- Company Secretary details if you wish to appoint one
- Directors details including their identity details, residential addresses and service addresses
- Shareholder details including their identity details and residential addresses
- Whether you require a free bank referral for your new business
- What is an “off the shelf” company?
An off the shelf company is a company that has already been formed with Companies House with an existing name, directors and shareholders. This company will usually then have been kept dormant until you purchase it. When you have purchased the company you will be appointed as a director and will purchase the shares to become the shareholder. The original directors and subscribers will then resign, effectively ‘passing over’ the company to you. Even though it is usually not a problem, you will not be aware of the history of the company or the owners. The director’s names will be linked to the company permanently and therefore their future conduct could also reflect upon your company. It is for this reason that most professionals will advise against ‘off the shelf’ companies.
The benefit of this system originally was that it was quicker to set up a company this way than by applying to Companies House through the post. However as company formations can now be completed quickly and easily online, this benefit of off the shelf companies is no longer relevant.
- What is the role of Companies House in relation to UK limited companies?
When you wish to incorporate a company you will have to send an application to Companies House. They will then either accept or reject it based on their rules and regulations. When your company has been formed, Companies House will issue you with an incorporation certificate which officially confirms the creation and registration of the company.
After your company has been incorporated, Companies House keeps an up to date record of all companies on their register. In order to keep up to date they require you to supply them with information of any changes that you make to your company, for example if you change the company name or the registered office address. Companies House also requires you to file annual accounts and an annual return.
- Can my company be dormant?
- You may want to incorporate your company but not start trading immediately; this is often called a dormant company. Your company can be dormant, however there are very specific rules regarding this. After you have finalised your company formation you will be sent a CT41G form by HMRC. If you intend the company to be dormant, you must fill in the dormant company version of this form so that they know that you will have no trading activity at the current time. When your company is dormant you must still file an annual return and dormant or AA02 annual accounts (depending on your circumstances). As soon as you begin trading, you must inform HMRC by filing a normal CT41G form.