Open a company in the UK: Everything you need to know

With the economic uncertainties surrounding Brexit, many prospective companies have contemplated postponing incorporating their company. But, with the prevailing laws governing the Companies House and HMRC, you may not need to delay your company formation in the UK.

How, you say? Keep reading this article for more information on that and what you actually need to incorporate a company in the UK.

What details do I need to form a company?

Fortunately, the only requirement that may seem important in company formation in the UK is that any company that wishes to operate in the UK – to buy or sell goods and services – must be registered with a UK address.

What this implies is that you do not have to be residential in the UK to use a UK address for company formation.

So, you can either use a director’s service address or a registered office address.

What is a director’s service address? 

The director’s service address is the address of the director of a company that could be used to incorporate the company with Companies House, through which the official mails and correspondence of the company can be received.

To avoid misunderstandings, using a director’s home or residential address may not be advisable, especially where the company has multiple directors. In this case, using a UK-based virtual office address as the director’s service address may come in handy. From such an address, important mail can be forwarded to the residential address of the director of the actual office address of the company which may or may not be domiciled in the UK.

What is a registered office address?

Where the director’s service address is not available to be used, a registered office address is the address of the head office or main office of the company which is used to register with Companies House.

Just like the director’s service address, the registered office address does not have to be the actual street address of the company office, rather, it could also be a UK virtual office address. In other words, the main office of the company does not have to be in the UK for company registration, so far you can provide a valid UK address while registering with Companies House.

Lastly, you must choose a name for your company. Choose a name under which to register your company. There are rules guiding company name choosing.

• The name cannot be in use by another company or be similar to that which is in use by another company.
• It must end with Limited or Ltd, or the Welsh version of it, which is Cyfyngedig or Cyf if you are registering in Wales.
• The company name cannot be the same as another name, too much like another name, be offensive, or contain any sensitive word(s)

You should also make sure that the name you have chosen is not already used by someone else, so you need to do verification first. You can do this through the Companies House register.

Simply enter your company name into the name check tool and search. Name search is free. After you have confirmed the validity of your company name, you can proceed with the registration.

What are the different types of legal company structures in the UK?

The legal company/business structures in the UK are sole proprietorship, partnership, limited liability company, cooperative, and corporation. It is important to know that there are many variants of the above-listed legal structures, some of which only need to register with the HMRC for tax payment and not Companies House at all.

For example, if your business falls under the category of a sole trader, business partnership, overseas company, social enterprise, or an unincorporated company, then you do not have to incorporate your business with the Companies House.

Otherwise, you must register with Companies House before you commence business if your company is Limited Partnership, Limited Liability Partnership, or Limited Company. The Limited Company can either be a Company Limited by Guarantee (CLG) or simply a Limited Liability Company (LLC – which is a company limited by liability or shares). It can also be a Public Limited Company (PLC). Usually, LLCs (which are Private Limited Companies) transition into PLCs when they wish to expand and increase the number of their shareholders.

Clubs, religious or educational institutions, NGOs, charitable associations, worker cooperatives, political parties, some intercontinental law firms or even financial organizations are examples of corporations with limited liability.

Companies limited by shares are mainly profit-oriented and therefore comprise companies that are not sole proprietorships or business partnerships.

Some companies limited by guarantee may not need to register with the Companies House or HMRC, i.e., such companies are registered with the Charities Commission.

What are the other steps to company incorporation in the UK?

• Select the company's directors and/or secretary. It is important to select one or more directors, but a corporate secretary is voluntary. Note that a company may have only one director and one shareholder, and a shareholder may also be a director. In other words, a person can own a limited liability company by being a director and a shareholder at the same time.
   
• Choose your company’s shareholders or guarantors. You need at least one of either (as applicable) and this person may or may not be a director. 
   
• Choose the people entitled to vote on your business (people with significant control – PSC).
   
• Prepare your documents of association (the statement of organisation of your company, describing how your company would run) i.e., memorandum and articles of association. You may wish to involve a lawyer in this step for a professional guide.
   
• Know the records you need to keep i.e., the company and account records, minutes of meetings, votes, etc. You should get help from an accountant to make sure your business account is properly balanced. Also, keep these records for a minimum of six years from the end of the last company's fiscal year.
   
• Register your company! For this, you’ll need: 
  -The company's address, which can be either the director's service address or the company's registered address, as explained above.
  -A Standard Industrial Classification code (SIC), which can be found on House Companies' website. It provides Companies House with a description of the nature of your business.
  -At least two or three of mother’s maiden name, national insurance number, telephone number, town of birth, passport number, and father’s first name of yours and your guarantors or shareholders.

After you are done with your registration and your documents have been verified, Companies House issues you a digital or electronic certificate of incorporation via email within 24 to 48 hours (if you register directly on their website). If you have requested for hardcopy certificate while registering, it will be sent to your registered office address.

In addition, please note that if your taxable turnover is over £85,000, you must register for VAT. If you take over a VAT-registered business, buy or sell VAT-exempt goods, your business is set up in Northern Ireland, or you supply goods and services to the UK even if you are not based there, then you need to register for VAT.

You can still choose to voluntarily register even if your turnover is below the threshold because VAT gives your company a kind of credibility that makes people think your turnover is high. Your VAT can also be claimed on the goods and services you sell. This means that VAT registration can be good for your company.

Note, however, that if your taxable turnover exceeds the threshold and you have not registered for VAT in due course, you will be penalized by HMRC.

What are the key benefits of registering a company in the UK?

• The whole process can start and end online. You do not have to make a physical appearance at the Companies House offices to incorporate your business. You may not even need a lawyer to draft an article of association for your company as you can simply use the general one automatically provided for newly incorporated companies by the Companies House. You can make modifications to that as the company grows and expand. 
   
• Company formation is very cheap in the UK. You pay as low as £12 to incorporate a company with Companies House if you register directly on their website. It could cost more if you are registering through a third-party website, via post, or through an agent.
   
• It is fast. You can complete the whole process of company formation within a day and obtain your certificate of incorporation within 10 working days. 
   
• Corporation tax is cheap in the UK and there are many taxes exemption laws as well as benefits and incentives. For example, people working construction get tax refunds!
   
• Boundless and highly competitive UK markets for goods and services generate unique business opportunities.
   
• There is the ease of doing business in the UK with minimal interference from the government. You can even sometimes benefit from numerous government support funds for businesses.

Conclusion

Company formation in the UK is still one of the easiest, fastest, and most cost-effective ones in the world. With access to the competitive and diverse market of the UK, you stand the chance of making maximum profit for your business than anywhere else in the world.