Despite the economic turbulence and uncertainties of the past year, more people are starting new companies now than in any year prior to 2012. Why? The benefit of limited liability is likely to be a key driver as sole traders seek to protect their personal assets, but a company structure can also be more tax efficient, add credibility to your business, and help your business to attract certain types of finance.
Whether you’re an existing business owner or you’re just starting out, if you’ve decided that now is the right time for you to set up a new company, it’s important that you get things right from the start. To set you on the right path, we’ve pulled together the six key decisions and choices you will need to make before you incorporate your company.
1. Choose your company name
You’ll need to register your company name with Companies House when you incorporate, which means it will have to meet certain legal requirements. This includes making sure it isn’t too similar to an existing company name and that you don’t use certain restricted words and characters (eg ‘Royal’). You’ll also need to be careful not to infringe another company’s trade marks, name or brand.
2. Choose your company’s registered office
Every company needs a registered office and you’ll need to provide the address to Companies House when you incorporate. Your registered office is your official address for correspondence, so whilst you don’t need to actually run your business from that address, you need to be able to access the post there on a regular basis.
3. Decide who will get shares
This is crucial, as your shareholders own and control your company. When you set up your company you will need to specify how many shares your company has, who they belong to and how much they’re worth.. Even if you will be the sole-shareholder, you still need to determine how many shares your company will have and what their value will be.
4. Decide who your company directors are
All UK companies must have at least one director. Although your shareholders will own and control your company, it is the directors who will be responsible for day-to-day management and decision-making. Most company founders will be both directors and shareholders of their company if they are involved in day-to-day operations.
There are a few basic rules about who can be a company director (eg. a director cannot be an undischarged bankrupt) and you must make sure that your directors understand the duties they will owe to your company before you appoint them. These include promoting the success of the company, exercising reasonable care, skill and diligence and avoiding situations where their personal interests conflict with those of the company. You can appoint your first directors by including their details in your application to Companies House when you apply to set up your company.
5. Choose your articles of association
Articles of association contain important rules about the internal operation of your company, and a copy must be filed at Companies House. Most new companies choose to use the model articles of association, which are the statutory default articles.
5. Choose your method of incorporation
Once you’re ready to set your company up, you’ll need to decide what method of incorporation to use. It’s easiest and cheapest to incorporate your company online, but you could also make your application on paper or via a formation agent or solicitor. Whatever method of incorporation you choose, this toolkit contains step-by-step guidance and 14 documents to help you start a company from scratch.
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