This guide concerns the formation of companies in the United Kigdom. Click on one of the boxes below for further information.
General information about companies and the benefits of Limited Liability.
The answers to the following questions contain useful general information on companies and their formation. You may also like to consult our Our Service information which contains questions relating to our services.
A company is a ‘legal person’ that is separate from its owners (the shareholders/members) and the people who run it (the directors). Companies can own property, conduct business, borrow money and do most things that an individual can.
Companies do not have a physical presence and therefore cannot do anything for themselves (such as sign a contract). A company’s officers, employees and agents must act on the company’s behalf. For example the directors of a company could sign a supply agreement on behalf of the company. The agreement would be between the company and the supplier, rather than the directors and the supplier.
For numerous reasons, depending on their individual circumstances. The more common reasons are:
Limited liability limits the risk of going into business. Limited liability is available if you form a Private Limited Company or a Public Limited Company. The overwhelming majority of companies formed in the UK are limited liability companies.
The effect of limited liability is best explained by way of example. If you invest £100 in a limited liability company (buying 100 £1 fully paid shares) then the maximum amount which you can lose if the company is not successful is normally* limited to your investment of £100, even if your company generates larger debts. Without limited liability you are personally liable for all of your businesses debts, no matter how large they are. Without limited liability you are potentially risking all of your assets, not just the amount you decide to invest in your business.
It is comforting to know that you can shield your personal assets such as your home, from the risk of going into business.
*Beware, there are exceptions to this rule. For example: it does not apply if you have given personal guarantees, or if you continue trading after you know – or should have known – that the company is unable to pay its debts.
All companies are obliged to file accounts and confirm their details to Companies House each year (on an Annual Return).
One – for a private limited company. Since 6 April 2008 a single person can form a company, and appoint themselves as the sole director and shareholder. Companies are no longer required to appoint a company secretary.
If you decide to appoint a company secretary and your company only has one director then the secretary you appoint cannot also be the sole director. In other words you will need two people, either two directors, one of which is the secretary, or one director and a secretary.
Public Limited Companies are still required to appoint a company secretary. They must also have at least two shareholders.
Yes, this is known as a Dormant Company. The only requirement is that you file an Annual Return and Dormant Company Accounts with Companies House each year. We can help you with that. The process is not particularly expensive or onerous. Companies House must also be informed of any changes to your company’s details.
Forming a Dormant Company is an effective way to reserve a name.
The registered office is the company’s official address to which official correspondence may be sent and notices served, such as communications from HM Revenue & Customs and Companies House. The post at a company’s registered office should be checked regularly.
All companies registered at Companies House must have their registered office in the country in which they are registered: England, Wales or Scotland. The registered office must be a valid postal address (or a PO Box which has been validated by the Royal Mail).
It is perfectly acceptable to have your residential address as your registered office.
The Memorandum and Articles of Association set out key details of the company and rules governing the mechanics which enable the Company to operate. For example, rules concerning the holding of meetings and the way in which the company makes decisions.
When we form a company on your behalf we will draft the Memorandum and Articles for your company and submit them to Companies House. We will also send a copy to you.
It has been possible for many years for companies to execute documents without the need for a company seal (such as a plier type seal). Therefore we do not include a seal in our formation package.
A director is responsible for the day-to-day running of the company. A shareholder owns a share of the company. Directors can be shareholders and vice-versa. The majority of smaller companies are both owned and run by the same people.
That depends on the internal rules of the company (the Articles of Association). All the companies we form only need one director (save for Public Limited Companies). Our companies also have no limit on the number of directors that can be appointed.
There are no formal qualifications required to become a company director. Although a director must not be:
There are no residence or nationality requirements for directors. For example, a French citizen living in Spain can be a director of an English company.
Standard Limited Companies (private companies limited by shares) formed after 8 April 2008 do not require a Company Secretary.
Public Limited Companies are still required to have a Company Secretary.
A Company Secretary is an officer of a company with responsibility for maintaining and updating the company’s official records. Duties include keeping minutes of board and shareholder meetings, making appropriate filings at Companies House, registering transfers of the company’s shares and giving notice of board and shareholder meetings.
There are no formal qualifications required to become a Company Secretary of a Standard Limited Company (private company limited by shares). Nor are there any nationality or residence requirements.
However, Public Limited Companies (PLCs) are required to appoint a sufficiently knowledgeable and experienced company secretary with one of the following qualifications:
A Public Limited Company (as opposed to a Private Limited Company) is a company in which the shareholders have agreed to invest at least £50,000 (and have paid at least £12,500 of that investment to the company). PLCs are subject to more onerous accounting and other obligations than a private limited company.
It is unusual for a company to be formed as a PLC. PLCs are normally formed by converting a Private Limited Company into a PLC.
For further information please read our Company Formation Guide.
If you would like to ask a question then simply type it into our feedback form and click ‘Submit’.
The information provided on this website is intended as a general guide only. It is not exhaustive or tailored to your individual circumstances. Please consult our Website Terms of Use for further information.
Should you form a Private or Public company, Limited by Shares or Guarantee?
WHAT TYPE OF COMPANY SHOULD YOU FORM?
We form the following types of company. Click on a type of company to learn more.
The overwhelming majority of companies registered at Companies House are standard limited companies (more formally known as private companies limited by shares).
If you are forming a company with a view to making a profit then a standard limited company is probably appropriate for your needs. We would recommend that you do not form a Company Limited by Guarantee or a Public Limited Company unless you have a specific reason for doing so.
Features of a standard limited company:
This type of company is suitable for non-profit making organisations such as voluntary groups, sports clubs, political organisations, and for one off or recurring events such as non-profit festivals and fairs. Companies limited by guarantee formed through Legal Clarity are not Charities, and are therefore not subject to the additional regulatory requirements imposed on Charities.
The members of companies limited by guarantee (the equivalent of shareholders of a normal company) are not permitted to extract money from the company, even if the company has surplus funds.
Features of a company limited by guarantee:
It is rare for a company to start its life as a Public Limited Company. PLCs are normally formed by converting an established standard limited company into a PLC.
A key feature of PLCs is their ability to offer their shares to the public (if certain conditions are met). Standard Limited Companies cannot do this.
PLCs are subject to more onerous regulation than standard limited companies. They are typically larger and longer established than standard limited companies.
Businesses sometimes become PLCs for the prestige of identifying themselves with larger and longer established companies; these companies are referred to as ‘vanity PLCs’.
Features of PLCs:
Other types of business structure:
A sole trader is not a type of company, but rather an individual who trades on their own behalf.
Sole traders are not required to register with Companies House. In order for an individual to set-up as a sole trader they simply need to start trading or carrying on business activities.
Sole traders are obliged to register as self-employed with HM Revenue & Customs within three months of starting to trade.
The most important point to note is that, unlike the shareholders of limited companies, sole traders do not benefit from the protection of limited liability in relation to their business. Sole traders are personally liable for all of the debts of their business without limit, which means that their personal assets are at risk.
For further information about the positives and negatives of operating as a sole trader as opposed to a limited company visit our sole trader page.
The description of the above types of company only applies to companies formed by Legal Clarity. Companies formed by other organisations are likely to have different features.
For further information please read our Company Formation Guide.
The information provided on this website is intended as a general guide only. It is not exhaustive or tailored to your individual circumstances. Please consult our Website Terms of Use for further information.
Why you should form a company with Legal Clarity.
Here are some of the reasons why customers choose Legal Clarity to form their companies. Click on the underlined text to learn more.
ONLINE & SECURE
Our system allows you to form a company entirely online.
We are an authorised e-filing partner of Companies House. This means that we can form your company entirely online.
FAST
Your company can be ready the same day.
Within minutes of ordering your company our system will generate and send all of the relevant details to Companies House for approval. We aim to form your company within just 4 hours of receiving your order.*
* subject to the availability of the Companies House system and provided that your order is received before noon on a working day. Almost all of our companies are formed within 24 hours of being ordered. For an additional fee we also offer a ‘same-day’ service.
QUALITY SUPPORT
Our telephone support is second to none.
Our highly trained team led by a solicitor (non-practising) can answer any questions you may have.
EASY
With our guidance forming a company could not be easier.
Our intuitive interview process and step-by-step guidance are second to none.
PRESENTATION PACK
We provide a comprehensive pack of company documentation.
The presentation we send to you after forming your company is of the highest quality.
UP TO DATE
This website is always up-to-date.
Our systems and guidance are always up-to-date with the latest developments in the law. We update this website daily.
COMPANY REGISTERS
All customers can use our Online Company Register for FREE.
Customers get free access to our Online Company Register service, this system was written exclusively for our customers.
PROACTIVE CHECKS
We check the information you provide.
Our system has an extensive error checking function, reducing the chance that your company details will be rejected by Companies House. Although if your details are rejected we will work with you to correct them and will resubmit them to Companies House for no additional charge.
OUR ETHOS
We are committed to meeting your needs.
You can expect excellent service and clear guidance from Legal Clarity.
Should you operate as a sole trader or limited company?
Choosing between forming a company and running your business as a sole trader is often a trade off between (a) the cost of setting-up and administering a company; and (b) the benefits that forming a company brings, such as limited liability.
This page aims to identify some of the positive and negative aspects of operating as a sole trader in order to assist you with that choice.
Sole traders are not required to register their business with Companies House before starting to trade. To set-up as a sole trader simply start trading or carrying out business activities.
* Please note that sole traders must register as self-employed with HM Revenue & Customs, and that specific licenses and other permissions may be required depending on the nature of the sole trader business.
Despite what you may read elsewhere, there is no requirement for sole traders to register their business name. Sole traders may however benefit from forming a dormant company to reserve a company name until such time as they are ready to run their business with the protection of limited liability.
Legal Clarity would be happy to form a dormant company on your behalf.
There is less administrative paperwork required when operating as a sole trader as opposed to a limited company.
In particular, sole traders are not required to file:
However, a self-assessment tax return will have to be submitted to HM Revenue & Customs each year.
Sole traders can convert into a limited company at any time.
Sole traders can register for VAT and take on employees. However if you are considering doing either then you should also consider whether converting your business to a limited company at that time would be prudent.
Unlike limited companies, sole traders do not benefit from limited liability. They are personally liable for all of the debts and obligations of their business without limit. A sole trader’s house and other personal assets can be seized to satisfy business debts.
The business name of a sole trader cannot be registered at Companies House. The name is not reserved for the sole trader should they wish to convert into a limited company with the same name at a later date.
Sole traders can however form a dormant company to reserve their business name until such time as they are ready to run their business with the protection of limited liability.
It is harder for sole traders to borrow money and to obtain investment in their business. In particular, sole traders do not have shares to issue to investors.
If you go into business with another person to make a profit then you will almost certainly be in partnership with that other person (unless you form a company together).
Each partner is personally liable for any debts that the other partners take on in relation to the business without limit.
Sole traders are almost always one-man-band businesses with a low level of turnover. Your customers will know this. Will this affect your reputation and your ability to attract custom?
In many business-to-business sectors customers will not employ your services unless you operate as a limited company and hold the appropriate insurances.
It is much more difficult for the business of a sole trader to survive the death, bankruptcy or resignation of the sole trader. If you want the business to be able to survive independently then you should consider forming a company.
For further information please read our Company Formation Guide.
The information provided on this website is intended as a general guide only. It is not exhaustive or tailored to your individual circumstances. Please consult our Website Terms of Use for further information.
All companies must maintain registers showing up-to-date information about the company and its officers. Companies traditionally purchase a hard-copy company register and fill in their company’s details.
Legal Clarity has a better approach.
We have developed an Online Company Register system for our customers. It provides your company with a straightforward and efficient way to create and store all of the legally required company registers. Best of all, its FREE when you form a company with us.
Please note that Company Registers are also referred to as ‘Company Books’ or ‘Statutory Registers’.
After forming a company with Legal Clarity you will receive a username and password to access your company’s Online Company Registers.
We will enter all of your new company’s details onto your registers, so that you fulfil your company’s legal obligations in this regard without lifting a finger. All you have to do is update your registers if and when there are any changes to your company’s details, such as the appointment of a new Director.
All the registers which you are required by law to maintain are included in our Online Company Registers including:
Our system also stores copies of your key company documentation such as the:
The Companies Act 2006 (coming into force up until October 2009) brings significant changes to the information that companies are required by law to record on their registers. Our Online Company Registers are updated with every change in the law, so that you do not have to purchase a new hard-copy set of registers every time the law changes.
Here are some questions and answers about our service. If you do not find the answer to your question below then do not hesitate to give us a call on the number above.
Our Company Formation System is an intuitive interview process. The system asks relevant questions to gather all of the information required to form your company. It then sends that information via our direct authorised link to Companies House. Companies House responds to confirm the formation of your company.
We will confirm the formation of your company by e-mail and send you a presentation folder containing the documents you will need for your new company.
You can form the following types of company:
For further information click here.
Typically 4 hours from the time we receive your details, subject to the availability of the Companies House systems and provided that your order is received before noon on a working day. Company formations only exceptionally take longer than 24 hours.
We also offer a guaranteed ‘same-day’ service for an additional fee. You will be given the option during the formation process.
Our systems run 24 hours a day 365 days a year, so you can form a company with us at any time.
Our interview process will lead you through the formation process and all the information required. Relevant guidance is available at each stage.
If you do not have all of the required information to hand you can save your progress at any time, then log in later to complete the formation.
You can save your progress at any time when forming a company with us, then log in later to complete the formation
Yes.
You are not committing to form a company until you pay for our service.
You can enter some of your details onto our system, save your progress and then log in later to complete the formation.
We use your e-mail address to send you an e-mail confirming receipt of your order and payment. We also use it as a reference to retrieve your company information when you log in or call us.
All payments are processed securely by HSBC. We accept all major credit and debit cards.
You can also pay by cheque or bank transfer. If you would like to pay by cheque or bank transfer then please Contact Us.
We accept payment in sterling (£) only.
A shelf-company is a company which is formed and then put on the ‘shelf’ for later use. Shelf-companies are typically formed to speed up the process of forming a company, which used to take several days.
When buying a shelf-company there is always a risk, despite any guarantee you may receive, that the company has traded and acquired debts before it is transferred to you. It is safer to form a new company.
Legal Clarity can form a new company within hours of receiving the required information. The formation process is so fast that there is no need to form shelf-companies. Every company formed by Legal Clarity is formed on demand.
We will send you an e-mail confirming that your company has been formed. We will also dispatch a presentation folder containing all the documentation you will require for your new company.
Our service includes unlimited resubmissions of your formation information to Companies House. If there is a problem with the information you have provided we will contact you to resolve the issue and then resubmit your information to Companies House.
Due to the nature of our service you only have a very limited right to cancel. Refunds are also only granted in exceptional circumstances.
We typically start to form your company within minutes of receiving payment, after we have sent you a confirmatory e-mail. This is when your right to cancel and receive a refund ceases.
Any hard-copy documents we create while forming your company are to your specification, and cannot by their nature be returned.
Any application to cancel may be sent by letter, fax or e-mail.
If you form a company with us you will receive a presentation folder containing important documents relating to your new company. This folder is usually dispatched within two days of the company being formed (it may exceptionally take longer, but never more than two weeks).
We will send the presentation folder to any address in the mainland UK specified by you. We will also send the folder outside the mainland UK for an additional charge.
Yes. Legal Clarity is an Alternative Business Structure law firm authorised and regulated by the Solicitors Regulation Authority (SRA number 573589).
No. All prices stated include delivery of any hard-copy documents by ordinary post.
Our prices may be changed without notice and our special offers may be withdrawn at any time (unless expressly stated otherwise on this website).
For further information please read our Company Formation Guide.
If you would like to ask a question then simply type it into our feedback form and click ‘Submit’.
The information provided on this website is intended as a general guide only. It is not exhaustive or tailored to your individual circumstances. Please consult our Website Terms of Use for further information.
This page outlines a number of reasons why a proposed company name may be rejected by Companies House, despite being ‘unique’ (i.e. where there is no company with exactly the same name on the register).
Names which are the same as names on already on the register will be rejected. The words and symbols which Companies House regards as the same are as follows:
In assessing each new company name the following words, symbols and phrases are ignored:
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The following symbols and words are ignored where they appear at the beginning of a name:
Companies House will reject any word that is offensive or which, if used, would constitute a criminal offence. These words mostly relate to specific occupations.
Our company name search tool will notify you if your proposed company name contains certain of these words.
Please note that our system does not include a comprehensive list of offensive words, and that plurals or other variations of offensive words may not be identified.
Certain words can only be used if you have the permission of the Secretary of State or of an interested body. The aim is to ensure that the inclusion of the word is justified and not misleading. Companies House administers the approval process on behalf of the Secretary of State. An example is the use of the word ‘Royal’ which cannot be used without the Secretary of State’s approval.
Our company name search tool will notify you if your proposed company name contains a ‘sensitive’ word, although we note that plurals or other variations of ‘sensitive’ words may not be identified.
