Company formation, United Kingdom

What to Consider When Forming a UK Company

UK company info

Several factors need to be considered when forming a UK company. The allocation of shares among the members of the company will be an important issue as this decides who controls the company and what proportion of dividends each person will receive. The question of who will be the director or directors is also important as the position of director carries specific responsibilities in UK company law. At least one director must be named and this will be a person responsible for managing the business.

Although there is no longer a requirement to appoint a company secretary it is good practice to determine who is to deal with the company filings. Formation of a UK company brings with it responsibilities to regularly file documents with Companies House and to other government agencies such as HM Revenue and Customs. Allocating the responsibility to a particular person is a good step towards making sure all company filings are carried out correctly and on time. Once the company has been formed reminders about company filings and tax returns will be received and must be acted upon to avoid penalties. The company secretary will also be responsible for timely notification of changes in directors or shareholders.

Consideration must be given to the company name. This can be important in conveying to potential customers the purpose of the company and the goods or services it will offer them. A company name can also send a message that the company is trustworthy and conscientious. Choosing the company name can be helped by understanding the people who will deal with the company and judging the effect of the company name on their view of the business.

The company’s internal affairs are regulated mainly by the Articles of Association and drafting these Articles requires care.  The Articles regulate the running of the company by setting out the allocation of shares and dividends, the voting rights and other responsibilities of directors and shareholders, the operations of the company and how internal changes to the rules will be made. The Articles can be written by the company or taken from a standard Model from Companies House or another source. The Memorandum of Association is a simpler document naming the shareholders, confirming that they wish to form a company and stating whether that company will have share capital.

The location of the company’s registered office is also important. This is the address where important documents will be sent. It would normally be either the head office of the company, the office of a legal or other professional adviser. In the case of small start ups and small businesses it could be the address of a director or company secretary. Legal documents or official reminders sent to the company from Companies House or HM Revenue and Customs should not be ignored so all mail must be monitored regularly.

These matters must all be decided when the company is formed and the relevant documents filed with the application. This process can be expensive in terms of fees, expenses and time. The formation process may be helped by an adviser or intermediary who can advise on allocating shares, drafting the Articles of Association and the other matters mentioned above.

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