| When starting a business, a large number of people | | | | shareholders in return for the appropriate sum of |
| go down the route of forming a limited company or, | | | | money. Ownership of shares gives the shareholders |
| to give it its full title, a limited liability company. | | | | the right to vote at company meetings and entitles |
| The alternative for someone starting up in business | | | | them to be paid dividends on their shares based on |
| on their own is to trade as a sole-trader. There is | | | | the profits of the company. |
| less formal paperwork involved in going into business | | | | Any shares which remain unsold are known as |
| as a sole-trader, but a limited company can offer a | | | | unallocated shares. |
| number of advantages. These include greater | | | | It is a good idea to seek advice from an accountant |
| opportunities to reduce the amount of tax your | | | | at this point, in order to make sure that the allocation |
| business pays, and increased protection of your | | | | of shares is done in the most tax efficient way for |
| personal assets in the event of the business running | | | | your own particular circumstances. |
| into problems. | | | | The final decision to make before forming your |
| This article explains how a limited company is | | | | limited company involves the company's registered |
| structured, and details the steps you need to take to | | | | office. Under Company Law, all companies are |
| form your own limited company. | | | | required to have a registered office. |
| The first thing you will need to do is to decide on a | | | | The registered office of a company is the address |
| name for your new limited company. Companies | | | | where official documents can be served and where |
| House maintains a list of all companies registered in | | | | certain statutory documents relating to the company |
| the UK, and you can use their website to check if | | | | are kept and can be made available for inspection. |
| the name you want is available or whether it is | | | | Common choices for the registered office address |
| already in use by another company. | | | | are either the home address of one of the directors |
| Whatever name you opt for will have to have the | | | | of the company, or the office of the company's |
| word "limited" (often abbreviated to Ltd) at the end. | | | | accountants. |
| So if, for example, your wanted to call your new | | | | Having made all these decisions, you now have all the |
| business "The Ultimate Widget Company" then the | | | | information you need to form your limited company. |
| full name of your limited company would be The | | | | The quickest and cheapest way to form a company |
| Ultimate Widget Company Limited or The Ultimate | | | | is using one of the many online company formation |
| Widget Company Ltd. | | | | services. For a fee of around £30 to £50 |
| Your new company will need at least two people to | | | | they will process your application with Companies |
| act as officers of the company. One of these people | | | | House and send you all the required company |
| will be the company secretary. The other person will | | | | documents by email for you to print out. For an |
| be a director of the company. If you wish, the | | | | additional fee, they will normally provide printed |
| company secretary can be a director as well, but he | | | | copies of the documents if you wish, but for most |
| she cannot be the sole director. | | | | people this is not considered necessary. |
| The company secretary has certain legal | | | | An alternative to forming the company from scratch |
| responsibilities such as ensuring that the company | | | | yourself is to buy what is known as an "off the shelf |
| submits annual returns to Companies House and that | | | | company". |
| the company and its directors operate within the law. | | | | Off the shelf companies are companies which have |
| Many people going into business on their own choose | | | | been formed already by a company formation agent, |
| their spouse or another family member to fulfil the | | | | but which have not yet traded. You pay a fee to the |
| role of company secretary. Where two or more | | | | formation agent and they then transfer ownership of |
| people are forming a limited company, one of them | | | | the ready-formed company to you. |
| will often take on the job of company secretary in | | | | Obviously, with an off the shelf company you are |
| addition to being one of the directors of the | | | | restricted on your choice of name for your company, |
| company. | | | | as you can only pick from the list of pre-formed off |
| An alternative is to use the services of a third party | | | | the shelf companies that the formation agent has |
| firm who provide company secretary services to | | | | available at that time. However, once you have |
| your business in return for an annual fee. | | | | bought your company you can apply via Companies |
| The next thing to decide is how you will allocate | | | | House to change its name, but there is a fee for this. |
| shares in your new company. You will need to | | | | As off the shelf companies tend to work out more |
| specify how many shares your company has and the | | | | expensive and less flexible than forming the company |
| value of them. Typically, companies are formed with | | | | yourself, it makes sense in the majority of cases to |
| 100 or 1000 shares with a value of £1 per share. | | | | form the company yourself using one of the online |
| Some or all of these shares are then issued to the | | | | formation services. |