Forming a company in the UK – accounting for startups
Forming a company is exciting. You’ve got loads of great ideas for your products and services, but what about all the formalities and legalities? This is where many business owners need a little bit of support to get things set up correctly. This article looks at forming a company in the UK and covers why you might need a limited company, the process of registering your company and some of the technicalities to consider when starting a business.
Why choose to register a limited company in the UK?
When you set up in business, one of the first choices you need to make is should you be a sole trader or a limited company?
Although there is no one-size fits all answer, there are some things to consider when deciding.
Benefits of becoming a limited company include:
- Limited liability protection which separates your business and personal finances. Should anything go wrong, you won’t risk loosing your home or other personal assets.
- Increased credibility as a business
- Potential tax advantages where corporation tax plus dividend tax could be lower than income tax depending on the level of business profits.
- Access to additional tax reliefs not available to sole traders.
- Attract investment more easily.
Considerations of becoming a limited company include:
- Additional filing requirements such as annual accounts with Companies House
- Depending on your business profits it may work out more tax efficient to remain as a sole trader
- Reduced level of privacy over business matters.
The process of forming a company in the UK.
Forming a company in the UK is fairly straightforward but there are a few things to carefully consider. Here are the steps you’ll need to take to set up.
- Choose your company name. It will need to be a name that isn’t already registered as an active company with Companies House. Your company name cannot be offensive, nor can it be too like another existing company. The name can also not suggest any connection to government or local authorities (unless express permission has been granted).
- Determine your company structure – choose your company directors
- Choose your shareholders.
- Identify the people with significant control (PSC)
- Create a memorandum and articles of association for your company
- Understand what records you will need to keep
- Register your company
All of these steps can be undertaken by you, but you can also choose to have an accountant manage it all for you if you are concerned about making errors that could affect your business in the future.
Costs of registering a company
There are some set up costs for forming a company in the UK. You may incur professional fees from an accountant or trademark lawyer for helping you to structure and register your company. In addition, there are registration costs which are payable to Companies House.
The importance of having an accountant for company formation
Although you can do everything yourself when forming your company in the UK as there’s no legal obligation to use an accountant, you may find it easier to hand the process over to a professional who can ensure it all gets set up correctly without delay. Some accountants offer company registration services with a very short turnaround time of 24 hours or even less.
An accountant will not only manage the registration with Companies House but also register your company for Corporation Tax and VAT if required. In addition, your accountant will be able to advise on the right company structure, division of share capital and director appointments which are required to form your company. The distribution of share capital will reflect the interests that different parties have in the running of the company. Typically, a sole director limited company will own all the shares.
Ongoing limited company accounts and the role of an accountant
Whether you have chosen to do your own set up when forming your company or your accountant managed the process, you are likely to need ongoing accountancy and tax advice services. A great accountant can help you grow your business, finding new opportunities for diversification or acquisition as well as mitigate your tax bill by ensuring all appropriate reliefs are claimed.
Setting up in business is fun, but it can also be overwhelming, especially at the beginning and if you aren’t sure about all the legalities. Many accountants offer a full service including monthly bookkeeping so you can be confident that your accounts are accurate and up to date throughout the year, and not just at tax year end. Having access to timely management information means you can make excellent decisions about the running of your business.
Are you looking to register a company?
Do you need help forming a company in the UK? At Adams Accountancy, we’ll manage the end-to-end process for you giving you peace of mind that everything has been done correctly. Call us today on 01322 250001 for a no-obligation chat about our bookkeeping, accountancy and company formation services.