Private Limited Company Formations: The Full Guide

Private Limited Company Formations: The Full Guide

CONTENTS

FORM A NEW COMPANY BY DEALING WITH COMPANIES HOUSE DIRECTLY
FORM A NEW COMPANY USING A ‘COMPANY FORMATIONS SERVICE’ / YOUR ACCOUNTANT
PURCHASE AN ‘OFF THE SHELF’ COMPANY AND THEN TRANSFER THE SHARES AND DIRECTORSHIPS TO YOURSELVES
A COMPANY CONSTITUTION
APPOINTING THE DIRECTORS OF THE COMPANY
APPOINTING THE COMPANY SECRETARY
WHO OWNS THE COMPANY?
CHOOSING A REGISTERED OFFICE
BEWARE!
CHOOSING A COMPANY NAME
COMPANIES HOUSE HAS LOTS OF INFORMATION


FORM A NEW COMPANY BY DEALING WITH COMPANIES HOUSE DIRECTLY

The ‘Pros’

  • It’s the cheapest method.
  • Companies House staff are accommodating and willing to guide you through the process.
  • You can choose the name of your company (as long as it’s a unique name).

The ‘Cons’

  • Typically longer to set up then an ‘off the shelf’ company
  • The process will be delayed if you make mistakes.
  • More effort – You have to do all the ‘leg work’.

Contacts:

Companies House
Companies Registration Office
Companies House
Crown Way
Cardiff
CF4 3UZ
https://www.gov.uk/government/organisations/companies-house

Getting The Forms

Forms can be obtained directly from Companies House. Also, 

provide several useful legal document templates, including some relating to DIY Company Formations. See their Free: Companies House, and sample documents.

FORM A NEW COMPANY USING A ‘COMPANY FORMATIONS SERVICE’ / YOUR ACCOUNTANT

The ‘Pros’

  • Using a professional service should give you the confidence that the company has been set up correctly.
  • The process is less likely to be delayed by errors.
  • You will benefit from their experience and advice, e.g. regarding the choice of names.
  • You can choose the name of your company (as long as its a unique name).

The ‘Cons’

  • It takes longer to set up than an ‘off the shelf’ company.
  • Usually more expensive than the other methods.

PURCHASE AN ‘OFF THE SHELF’ COMPANY AND THEN TRANSFER THE SHARES AND DIRECTORSHIPS TO YOURSELVES

The ‘Pros’

  • Using a professional service should give you the confidence that the company has been set up correctly.
  • It may be quicker than learning how the set-up process works by yourself.

The ‘Cons’

  • You have a limited choice of names.
  • More expensive than forming a new company by dealing directly with Companies House.

A COMPANY CONSTITUTION

Every company has a memorandum of association, which determines its name, where the registered office is to be situated and what it may do (its objects).
The rules for the conduct of the company’s internal affairs are contained in its articles of association. (E.g. It may state that the company cannot own shares in another company).

If you buy an ‘off the shelf’ company, you may have to officially change these rules to suit your needs.

APPOINTING THE DIRECTORS OF THE COMPANY

How many?

Every private limited company needs to have one director as a minimum (and a secretary).

There is no maximum limit to the amount of directors you can have.

Your records.

Limited companies must keep a register of directors and secretaries, which must be available for public inspection.

Share Ownership.

Directors are not generally required to own share’s in the companies that they manage, but there is nothing to forbid them from doing so, and they often do.

It’s not just a title!

Among other things, the directors are responsible for the management of the company.

The directors are responsible for ensuring that the company does everything that it is obliged to do by law.

All directors are personally responsible for ensuring that the accounts are prepared, circulated to the members (those who own the company), and delivered to Companies House on time.

Make sure all of the directors understand their responsibilities.

Show me the money!

The directors are paid as employees of the company. Eg. Taxed PAYE and making National Insurance contributions.

APPOINTING THE COMPANY SECRETARY

What does a company secretary do?

Every private limited company must have a secretary (and at least one director). The secretary is the chief administrator for the limited company.

They usually take charge of ensuring that any documents which need to be submitted to Companies House are submitted on time.

The secretary can also be a director, and therefore have the same responsibilities as the other directors.

If the secretary isn’t a director, he or she is still is an officer of the company and is responsible for its actions (except for the companies accounts, which are the personal responsibility of the directors).

Share Ownership.

Secretaries are not generally required to own share’s in the companies that they manage, but there is nothing to prevent them from holding shares, and they often do.

WHO OWNS THE COMPANY?

The Members.

A company is owned by ‘the members’, usually shareholders.

How many?

There is no maximum amount of shareholders in a private limited company as long as the shares of the company have not been offered to the general public.

It is achievable for a company to have just one member, and for that member to have only one share.

Is there a minimum amount of capital required to form the company?

There is no statutory minimum capital or maximum capital for a private limited company, (although a public limited company has to meet specific capital requirements).

How much is there to lose?

A limited company may have limited liability for its members. This means that, if a company is put into liquidation due to not being able to pay its debts, the members will not be required to contribute more than they have agreed to pay, towards settling its debts.

A private company can be limited by shares or by guarantee, (which is a commitment to contribute a given sum if the company is wound up). E.g. Your bank may ask for a directors’ personal guarantee on a company’s loan.

Who can own shares?

Directors and secretaries are not generally required to own share’s in the companies that they manage, but there is nothing preventing them from doing so, and they often do.

 A limited company is a legal person in its own right and can own shares in another company.

 A private limited company cannot offer to sell its shares to the public (but a public limited company, or PLC / CCC*, can.)

* Cwmni Cyfyngedig Cyhoeddus (If it’s registered office has to be in Wales),

Show me the money!

Corporation tax is paid on profits. Dividends are declared by the board of directors and paid to the shareholders, but profits may be kept in the business.

CHOOSING A REGISTERED OFFICE

What’s it for?

Every company must have a registered office.

It is the address to which any formal communications may be sent.

It is the address that Companies House will use to send reminders and annual return forms etc.

It must be a physical location – as opposed to a post office box- because people have the right to visit it (to inspect specific registers and other documents) and deliver documents by hand.

Does it HAVE to be at the business premises?

No, but it CAN be the company’s business premises. Alternatively, it could be a private address, or a solicitor’s or an accountant’s office.

The important thing is to ensure that, wherever it is, documents kept there must be available for inspection and mail sent there must receive attention.

Where can it be situated?

The registered office can be set up anywhere according to the memorandum.

For a limited company incorporated in England and Wales, this will usually be in those stated regions, but it may just be Wales. For a company set up in Scotland, it must be Scotland itself.

BEWARE!

If accounts and annual returns become overdue and subsequent letters from Companies House are ignored, this could lead to the limited company being struck off the central register and dissolved on the idea that it appears to not be carrying on business or otherwise operational. Its assets would subsequently pass to the Crown!

CHOOSING A COMPANY NAME

Use a company formations service to check names online.

Are there any restrictions on naming a company?

Yes, there are certain words that you cannot use without permission or proper entitlement, such as; ‘Royal’, ‘Authority’, or ‘International’ etc.

You cannot choose a name that is currently being used by another company.

It is wise to have a second and maybe third choice of name, just in case.

You should also make sure that there is no objection to your choice of name, if it is too similar to another company’s name, you may have to change it. This could be costly.

The suffix.

A private limited company will usually have a name ending in Limited or Ltd, but if it’s a registered office must be in Wales, it may use Cyfyngedig or Cyf.

COMPANIES HOUSE HAS LOTS OF INFORMATION

(Including – ‘Choosing a company name’ (CHN2).)

Companies House
Companies Registration Office
Companies House
Crown Way
Cardiff
CF4 3UZ

http://www.companieshouse.gov.uk/

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