It is time to formalise and register the business legally with the government. Fortunately, the UK is one of the most accessible places to register your business and takes on average 12 minutes to complete and costs £12 to do so.
Disclaimer: This article was replicate based on the information from the gov.uk portal on the 31st of May, 2022. Therefore, it is advise to check for any updates using the following link. This article only applies to businesses wishing to trade in the UK. Please refer to your local government guidelines on registering a business for companies in other countries.
Let’s get into it…
Recently, there have been several businesses that help with registering your business for free. If you open a bank account or if you agree to conduct business with them.
Although they will register your company free of charge, we recommend you register your business yourself directly through the Companies House Portal to have complete control and visibility of the required documents. Before we start, you will need your shareholders’ national insurance numbers and passport numbers.
The link to register your company is here:
https://www.tax.service.gov.uk/register-your-company/setting-up-new-limited-company
This article has been divided into 7 steps that you will need to register your business in the UK successfully.
1. Choose your company name
When choosing your company name, you should look out for already registered businesses with similar names. First, it will be difficult for you to stand out as your customers will always mix up between your company and the other company. Second, this makes you prone to legal complaints, which can be costly as you will be forced to change your branding and domain, potentially losing customers. Therefore, a simple google search about the business name in mind should be more than enough. The government website has recently launched a tool that allows you to check whether there is another business trading with your preferred business name.
Other tips to think of when choosing a name:
- The name of the business should not be offensive or contain sensitive word
- You must include “Limited” or “LTD when registering your business.” These prefixes CAN NOT be used interchangeably. Think Carefully. Stick to it.
- You can trade using a different name to the registered name. It will appear on Companies House as “Business Name” following “t/a,” which stands for “trading as.”
2. Choose your director(s)
You are required to assign at least one director to the company. Below are the guidelines regarding eligibility for directors.
- Older than 16 years old and not previously disqualified from a director position
- Directors do not have to live in the UK but must have a registered office address in the UK.
- Becoming a director is a substantial commitment. Once appointed, a director becomes subject to directors’ duties enshrined in the Companies Act, which, if breached, can lead to personal legal liability.
- You do not need more than one director if you adopt the model articles of association (which 99% of companies do when they incorporate). Neither do you have to appoint a company secretary.
- If you are starting a business with a team. It would be advisable to appoint two directors to improve company decision-making.
- You must keep a register of all directors at your registered office address. That register must contain the director’s full name, former names, service address, date of birth, the country they are usually resident in, nationality, business occupation, and the date they became a director.
3. Choose your shareholder(s) and share structure
You also need at least one shareholder. If you are setting up a business by yourself. You can appoint yourself as the director and be the sole shareholder in your company.
You want to set your company up so that it is ‘limited by shares’ as opposed to ‘limited by guarantee’ as being limited by shares. It means the company is owned by the shareholders, who are given voting rights that attach to the shares they own and means that the personal liability of the shareholders will only equal the value of the shares they own (e.g., almost no liability).
You should create ‘ordinary’ shares, which give each shareholder one vote per share, and a right to receive dividend payments in the future.
It is recommended to incorporate 1000 ordinary shares, each with a nominal value of £0.1, so that your entire share capital equals £100. This will give you enough wriggle room. If you decide to transfer some shares to other individuals or wish to issue more shares to investors.
You must keep a register of all of your shareholders at your company’s registered office. This register must contain each shareholder’s full name, contact address, number and class of share, the amount paid on each share, and the date they became a shareholder.
4. Identify your persons of significant control
You must keep a record of everyone regarded as a ‘person of substantial control’ at your registered office. And file that PSC information with Companies House, as required by law. Failure to make this register available for examination constitutes a criminal offense.
A person with considerable control for incorporation is someone who owns more than 25% of the company’s shares.
You must also register anyone who owns more than 25% of the voting rights in the company. However, because you will be incorporating with ordinary shares. Your voting and ownership percentages will remain equal until you decide to issue ‘non-voting’ shares, at which point you will not be required to do so until later on.
5. Create your articles of association
If you register your business online using Companies House, you will receive a memorandum of association. A legally needed document proving that the company’s original shareholders consented to create it.
You will also receive what is known as model articles of association.’ These are your company’s constitutional rules, which outline how decisions are made within the organisation. Until you have spent some time building your business, the sample articles will suffice.
You can also choose to adapt your custom articles if you already have them written. It would be best to use the model articles of association unless they have been appropriately created.
6. Choose your registered address
You must provide a registered office address. This is where official communication will be sent, such as letters from Companies House, and where people can expect to find your statutory registers.
The address must be a physical address in the UK (and must be in the country your company is registered, e.g., an English address for an English company). You cannot remove this address from Companies House, so if you do not wish to use your residential address, you should consider finding a suitable alternative address before incorporation.
If you do not have an alternative address, you can set up a virtual address where all correspondence sent to the virtual address will be forwarded to your home address.
7. Choose your SIC code
Your new company’s Standard Industrial Classification (“SIC”) code is used to determine the type of economic activity it will engage in. The Office of National Statistics uses these codes to collect information on the many businesses in the United Kingdom. SIC codes are challenging to use since your company will not fit neatly into a single category more often than not. Try to use the SIC codes of the closest match to your business using Companies House: Get information about a Business tool.
Companies House has a tool that allows you to search for the most appropriate SIC code for your new business here.
You have now legally set up your company and are ready to start trading.
A few things that you also need to consider include:
- Set up payroll
- Set up team agreements
- Set up your shareholders’ agreement
- Set up your Accounti
