Guide to Company Formation (UK)

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Establishing a business can be a complicated process and the first step is to form a company. This involves registering the business with the relevant government body (such as Companies House in the UK), which will provide it with legal recognition, rights and responsibilities. Additionally, it is important to consider which structure is most suitable for the company. For example, limited company, sole trader or limited liability partnership - each offering its own advantages and disadvantages. It is also essential to understand that once registered, the business will face potential legal and financial repercussions so expert advice should be sought from The Genie AI community template library.

The practical considerations of forming a company are just as important – including finding premises, creating a business plan, filing paperwork and registering with authorities. Failure to do so could result in future delays and disruptions so it pays off to ensure everything is completed efficiently and properly. At Genie AI we provide free company formation templates and offer guidance on how best to approach this process without having to pay for an account or lawyer fees. Step-by-step guidance can also be found on our website allowing entrepreneurs and small businesses owners more time to focus on core tasks within their business development journey.

Definitions

Sole trader: An individual who is the sole owner and operator of a business, and the business is not separate from the owner in terms of legal liability.

Partnership: A business owned by two or more people, and the partners are jointly and severally liable for the business’s debts and obligations.

Limited company: A separate legal entity from its owners, and the owners of the company are not personally liable for the company’s debts and obligations.

Companies House: A government agency which is responsible for registering and monitoring companies in the UK.

Certificate of Incorporation: Evidence that the company has been legally registered.

Directors: Responsible for the day-to-day management of the company.

Shareholders: Responsible for the ownership of the company.

Articles of Association: A set of rules which govern the internal management of a company.

Companies Act 2006: An act of Parliament which sets out the rules and regulations for companies in the UK.

Value Added Tax (VAT): A type of tax which is imposed on the sale of goods and services in the UK.

HM Revenue & Customs (HMRC): A government agency which is responsible for collecting taxes in the UK.

Payroll: The system used to pay employees and keep track of employee information.

Employment laws: Laws which govern the relationship between employers and employees.

Minimum wage: The minimum amount of pay which employers are legally required to pay employees.

Employee benefits: Additional benefits which employers are legally required to provide to employees.

Taxation obligations: Legal obligations which companies must meet in order to comply with taxation laws.

Tax rates: The amount of tax which must be paid by companies.

Tax incentives: Financial incentives which are offered by the government to encourage companies to comply with taxation laws.

Licenses and permits: Official authorizations which allow businesses to legally operate.

Planning permission: Official authorization which allows businesses to use a certain property for a certain purpose.

Online presence: A presence on the internet, including websites and social media accounts.

Contents

1. Understanding the legal structure of a business in the UK
2. Registering the company with Companies House
3. Appointing company directors and shareholders
4. Opening a business bank account
5. Applying for a VAT number
6. Completing any necessary applications and paperwork
7. Obtaining necessary permits and licenses
8. Researching the specific licenses and permits required for the business
9. Applying for the licenses and permits
10. Filing annual returns with Companies House
11. Understanding taxation obligations in the UK
12. Researching applicable tax rates
13. Registering for the applicable taxes
14. Understanding what records must be kept
15. Setting up payroll for employees
16. Researching payroll software
17. Understanding employee contracts and other legal requirements
18. Setting up the payroll system
19. Understanding employer responsibilities
20. Researching applicable employment laws
21. Understanding employer obligations such as paying minimum wage
22. Understanding the legal requirements for business premises
23. Researching the relevant laws
24. Understanding any specific requirements for the type of business
25. Obtaining any necessary planning permission
26. Researching the relevant laws
27. Filing for the necessary permissions
28. Establishing a strong online presence
29. Setting up a professional website
30. Creating relevant social media accounts
31. Establishing a brand identity

Get started

Understanding the legal structure of a business in the UK

• Research the different types of business structures available in the UK, such as Sole Trader, Limited Company, Limited Liability Partnership, etc.
• Understand the advantages and disadvantages of the different legal structures.
• Consider the legal obligations of each structure, such as registering for tax and filing accounts.
• Seek advice from a professional or a qualified adviser if needed.

You can check this off your list when you have a good understanding of the different types of legal structure available in the UK and you have decided which one is best suited to your business.

Registering the company with Companies House

• Submit the company’s formation documents, such as the Memorandum of Association and Articles of Association, to Companies House
• Include the company’s name and registered office address, and details of the company’s directors and shareholders
• Pay the incorporation fee
• Once Companies House has approved the documents, they will issue a Certificate of Incorporation
• Check that all the details on the Certificate of Incorporation are correct
• When you receive the Certificate of Incorporation, you can move on to the next step of appointing company directors and shareholders.

Appointing company directors and shareholders

• Obtain the consent of each director to act in the role
• Appoint at least one director
• Each director must be 16 or over and have a valid UK address
• If applicable, appoint a company secretary
• Obtain the consent of each shareholder to act in the role
• Appoint at least one shareholder
• Issue share certificates
• Keep a register of shareholders

Once all of the above is complete, you can move on to the next step of opening a business bank account.

Opening a business bank account

• Contact your preferred bank to discuss their services and fees
• Select the type of business bank account that best suits your business needs
• Provide the bank with the required documents to open the account, such as proof of identity, proof of address and business registration documents
• Set up online banking and contactless payment methods for your business
• Once you have confirmed that the account is open and active, you can move onto the next step of applying for a VAT number.

Applying for a VAT number

• Contact HMRC to determine if your business needs to register for VAT
• If your business is required to register for VAT, fill out the online application form
• Submit the form and provide required documents
• Receive an acknowledgement letter from HMRC with your VAT registration number
• Once you receive the letter, your business is officially registered for VAT and you can move on to completing any necessary applications and paperwork.

Completing any necessary applications and paperwork

• Gather the necessary documents and information needed to fill out applications.
• Submit all applicable forms to the appropriate entities, such as the Companies House and HMRC.
• Pay any fees associated with the applications.
• Wait for the necessary paperwork to be approved.
• Once all applications have been approved, you can move on to the next step of obtaining necessary permits and licenses.

Obtaining necessary permits and licenses

• Determine the licenses and permits needed for your business, based on the type of business and its location
• Check with local government offices and agencies to determine the exact requirements for each permit and license
• Submit applications for the necessary permits and licenses, along with any required fees
• Wait for approval, which may take anywhere from a few days to a few weeks
• Once all permits and licenses have been approved, you can move on to the next step in company formation.

Researching the specific licenses and permits required for the business

• Make a list of the activities your business will conduct to determine which specific licenses and permits are needed
• Visit the GOV.UK website to research the types of licenses and permits required for your business
• Check the local government websites for any additional local licenses and permits that may be needed
• Contact a professional to get help with researching the exact licenses and permits required for your business

Once you have identified the necessary licenses and permits required for your business, you can move on to the next step of applying for them.

Applying for the licenses and permits

• Contact the local authority in the area in which the business will be based, or relevant government body, to apply for any necessary licenses and permits
• Make sure to have all the necessary documents in order, such as incorporation certificates, business plans, and proof of address
• Submit the documents and pay any applicable fees
• Depending on the type of license or permit you are applying for, it may take up to a few weeks to get a response
• Once you have received all the necessary licenses and permits, you can check this off your list and move on to the next step.

Filing annual returns with Companies House

• Make sure your company is up to date with Companies House: register any changes in directors, shareholders, or the registered office address
• Submit the annual return to Companies House online, or download and complete the form and post it
• Include any required documents with the annual return, such as a copy of the company’s accounts
• Pay the relevant fee when submitting the annual return
• You will know that you have successfully completed this step when you receive a confirmation email from Companies House.

Understanding taxation obligations in the UK

• Understand the different UK taxation requirements and obligations for your company, such as Corporation Tax, VAT, PAYE, and any other applicable taxes
• Research and understand the different tax rates and how they might apply to your company and its operations
• Investigate whether you need to register for VAT or not, and whether you are eligible for any tax reliefs
• Ensure you are aware of and understand the deadlines for tax payments and filing returns
• Seek professional advice if you are unsure about any of your tax obligations
• Check off this step when you have a thorough understanding of your company’s taxation obligations in the UK.

Researching applicable tax rates

• Research the UK’s corporation tax rates, which are based on the company’s profits
• Research the UK’s Value Added Tax (VAT) rates, which are based on the company’s turnover
• Research the UK’s payroll taxes, which are based on the company’s employees
• Research any other applicable taxes, such as stamp duty
• Compare different rates and decide which ones apply to your company
• When you have a good understanding of the applicable tax rates, you can check this off your list and move onto the next step of registering for the applicable taxes.

Registering for the applicable taxes

• Identify which taxes are applicable to your company (e.g. corporation tax, income tax, VAT, etc.)
• Register your company with HMRC for the taxes you need to pay
• Ensure you have an up-to-date understanding of the tax rates you will need to pay and the filing deadlines
• You can check off this step once you have registered your company with HMRC for the applicable taxes and you have an up-to-date understanding of the tax rates and filing deadlines.

Understanding what records must be kept

• Understand what records must be kept as a company in the UK, such as minutes of meetings, invoices, financial statements, and any other documents related to the company’s activities
• Identify the appropriate software to help you keep track of documents and records
• Set up a filing system to store all of the company’s records
• Know what records must be kept in accordance with UK law
• Once you have identified and set up a system to store the necessary records, you can move on to the next step.

Setting up payroll for employees

• Research what payroll system is best for your business - consider features, cost, and compatibility with existing software
• Set up the payroll system and configure it to suit your needs
• Ensure you have the correct payroll information for your employees such as bank account details, National Insurance numbers and tax codes
• Run through a payroll test to make sure the system is configured correctly and you have input the correct information
• Once you have completed the above steps, you have now set up your payroll system and you can move to the next step.

Researching payroll software

• Research different payroll software available in the UK
• Look into reviews, features and pricing of the software
• Contact customer service representatives and ask any questions you may have
• Compare the different software to decide which one is best suited for your business
• Purchase and install the software
• Make sure you understand how to use the software
• When you’re ready, you can move on to the next step of understanding employee contracts and other legal requirements.

Understanding employee contracts and other legal requirements

• Make sure you understand the legal requirements for employee contracts and other documentations
• Obtain the relevant information from government agencies, such as the UK’s Companies House
• Consult a solicitor or legal advisor to make sure all of the documents are up to date and in compliance with relevant regulations
• Draft any necessary documents, such as a formal contract of employment
• Consider any other legal requirements for the type of organisation you are setting up
• Make sure you have any applicable insurance or other protections in place
• Once all documents are up to date and in compliance, you can check this off your list and move on to the next step.

Setting up the payroll system

• Ensure all employees are correctly registered and recorded on payroll software
• Request Unique Taxpayer Reference (UTR) numbers from HMRC for each employee
• Register as an employer with HMRC and notify them of the number of employees
• Set up and register PAYE with HMRC
• Choose a payroll provider and set up the payroll system
• Generate payslips for employees
• Make sure you deduct the correct amount of Income Tax and National Insurance Contributions
• Make sure to file payroll information to HMRC every time wages are paid and submit the year-end report

You’ll know you can check this step off your list when you have successfully registered as an employer with HMRC, chosen a payroll provider and set up the payroll system, and are generating payslips for your employees.

Understanding employer responsibilities

• Learn about the UK’s Employment Rights Act 1996 and other applicable employment laws
• Familiarize yourself with the legal requirements for employers, including health and safety standards, employee contracts, and other regulations
• Understand the tax and National Insurance contributions that must be paid to HMRC
• Research any additional benefits or entitlements you may be required to provide to your employees
• Understand the employer’s responsibilities when it comes to employee pension schemes
• When you have a thorough understanding of all applicable laws and regulations, you can move on to the next step.

Researching applicable employment laws

• Research relevant employment laws in the UK such as the Working Time Regulations, the Employment Rights Act, the National Minimum Wage Act, and other relevant legislation
• Read up on the rights and responsibilities for employers and employees
• Familiarise yourself with key statutes such as the Employment Rights Act and the National Minimum Wage Act
• Research any relevant tax regulations that might impact your business
• Research any industry-specific regulations or laws that may apply to your business
• Once you have a good understanding of the relevant employment laws in the UK and the responsibilities of employers, you can move on to the next step.

Understanding employer obligations such as paying minimum wage

• Research the national minimum wage rates and any additional obligations, such as paying the living wage or providing pension contributions
• Understand the details of employee contracts, such as hours worked and pay
• Familiarise yourself with the rules on holiday entitlement and other employee benefits
• Check the rules on redundancy and dismissal
• When you’re confident that you understand your employer obligations, you can move on to the next step of understanding the legal requirements for business premises.

Understanding the legal requirements for business premises

• Check whether you need to register for business premises with the local authority – this will depend on the type of business you have
• Ensure that your business premises comply with health and safety regulations and building standards
• Check whether you need any special licences or permits to operate from your business premises – this will depend on the type of business you have
• Understand your legal obligations for business rates and other local taxes
• Make sure that your business premises comply with fire regulations

When you have checked off all these points, you can move on to the next step - researching the relevant laws.

Researching the relevant laws

• Read up on the Companies Act 2006 and the Insolvency Act 1986
• Familiarise yourself with the regulations that apply to companies in the UK
• Research any other relevant laws and regulations that may apply to the type of business you are setting up
• Be aware of any relevant changes to the law since your business formation
• Make sure you are aware of any specific requirements for the type of business you are setting up
• Check that the information you have collected is up-to-date and accurate
• When you have researched the relevant laws and regulations and have a good understanding of them, you can move on to the next step.

Understanding any specific requirements for the type of business

• Read up on any specific requirements for the type of company you are looking to form in the UK.
• Make sure you know any regulations or restrictions that may apply.
• Understand the legal requirements for the type of company you are forming.
• Check if there are any restrictions on the type of business you are looking to form in the UK.
• Get in touch with a lawyer to get professional advice on forming a company in the UK.
• Once you understand all relevant requirements for the type of business you are looking to form, you can check this off your list and move on to the next step.

Obtaining any necessary planning permission

• Research any local zoning requirements for the type of business you plan to open
• Consider the location of the business and review any local regulations that may affect your plans
• Contact the local council’s planning department to determine if you need to apply for planning permission
• Submit any necessary paperwork or applications as required to the local council
• Wait for the council to grant or reject your planning permission
• Once you have obtained planning permission, you will be able to move on to researching the relevant laws for your business.

Researching the relevant laws

• Read through the Companies Act 2006 and any relevant regulations in order to understand the requirements of setting up a company in the UK
• Visit the UK Government website to research any other laws and regulations that may affect your new company
• Speak to a lawyer who is experienced in company formation in the UK to ensure you have a full understanding of the regulations
• When you have a full understanding of the regulations and are confident you can meet the requirements, you can check off this step and move on to the next.

Filing for the necessary permissions

• Research the different types of permissions and licenses needed to run a UK limited company, including any specific requirements or regulations for the industry you are operating in
• Submit the required applications to Companies House and other relevant authorities
• Pay the applicable fees associated with the applications
• Check that the applications have been successful and that you have received the necessary permissions
• Once all applications have been processed and accepted, you can move on to the next step of establishing a strong online presence

Establishing a strong online presence

• Research domain names and decide on one to use for your company’s website
• Register your domain name and set up hosting for your website
• Design a professional website for your company
• Create social media accounts for your company on relevant networks
• Post regular updates and interact with customers on your social media accounts

Once you have established a strong online presence, you can check this step off your list and move on to the next step: setting up a professional website.

Setting up a professional website

• Decide what type of website you need to create for your business
• Research domain name options and select the best one for your business
• Find a website hosting provider and register a domain name
• Select a website builder or use a platform like WordPress
• Customize the website with logos, images, text, and other design elements
• Connect your website to a payment processor, if needed
• Install SEO plugins to optimize the website for search engines
• Test the website to make sure everything works correctly
• When your website is live, you can check this step off your list and move on to creating relevant social media accounts.

Creating relevant social media accounts

• Research the social media platforms most popular with your target audience and create accounts on those platforms
• Decide on the tone and content of your social media presence
• Come up with a strategy for posting regularly and engaging with the community
• Create visual content such as graphics, videos, and images to post on your social media accounts
• Optimize your accounts for search engine optimization
• Connect your accounts to your website and other accounts
• Monitor analytics regularly and adjust your strategy accordingly

When you have completed all these steps, you can move on to the next step: Establishing a brand identity.

Establishing a brand identity

• Identify the core purpose, values, and mission of your business
• Brainstorm and decide on a name for your business
• Develop a logo and overall branding aesthetic
• Choose a domain name and secure the URL
• Create business cards and email signatures
• Update your social media accounts with the new branding
• Once you have established your brand identity and are comfortable with it, you can move on to the next step.

FAQ

Q: What is the most effective way of setting up a company in the UK?

Asked by Madison on 15 September 2022.
A: Setting up a company in the UK is relatively straightforward, but it’s important to understand the specific regulations and rules that apply to your particular industry and sector. There are different routes to company formation, such as incorporating a limited company (Ltd), setting up as a sole trader or establishing a business partnership. Depending on your individual circumstances, one of these options may be more advantageous than the others. Ultimately, it pays to do your research and consider all of your options before you make a decision.

Q: What is the difference between UK and US company formation?

Asked by David on 8 August 2022.
A: Company formation in the United States and the United Kingdom are quite different processes. In the US, company formation is regulated by state law, while in the UK it is regulated by national law. For example, in the US, you may need to register with multiple states depending on where you do business, while in the UK you are only required to register with Companies House. Additionally, in the US, you will need to register with the IRS for an Employer Identification Number (EIN) and in some states for a Sales Tax ID number; in the UK, you will need to register for VAT if your turnover exceeds certain thresholds.

Q: Could I get advice on which type of company formation I should choose?

Asked by Emma on 11 April 2022.
A: Absolutely! Seeking professional advice from an experienced lawyer or accountant can be extremely beneficial when it comes to choosing which type of business structure is best suited for your needs. An advisor can help you weigh up all of your options and ensure that you are making an informed decision that aligns with your long-term objectives.

Q: Is there any special paperwork I need to fill out when forming a company in the UK?

Asked by Joshua on 11 December 2022.
A: Yes, there is some paperwork associated with setting up a company in the UK. You will need to file documents such as a Memorandum of Association and Articles of Association with Companies House, as well as filing any additional documents required by your chosen business structure (such as a Partnership Agreement if you are establishing a business partnership). You may also need to apply for any relevant licenses or permits that apply to your industry sector.

Q: What taxes do I have to pay when setting up a company in the UK?

Asked by Ashley on 18 October 2022.
A: When setting up a company in the UK, you will need to pay Corporation Tax on profits made by your business each year, as well as any applicable Value Added Tax (VAT). Depending on your individual circumstances, you may also be liable for other taxes such as income tax or National Insurance Contributions (NICs). It’s always best to consult an accountant or tax advisor to ensure that you are aware of all applicable taxes and obligations when starting up a business.

Q: How can I protect my intellectual property when forming my company?

Asked by Michael on 14 June 2022.
A: Protecting your intellectual property is essential when forming a company in any jurisdiction, including the UK. You should consider registering any relevant trademarks or copyrights before launching your business, as this can provide additional legal protection against infringement or misuse of your intellectual property. Additionally, it’s important to ensure that any contracts or agreements with suppliers or customers include provisions regarding ownership of intellectual property rights; this will help protect you against potential disputes down the line.

Q: What are some common mistakes people make when setting up companies in the UK?

Asked by Madison on 22 April 2022.
A: One common mistake people make when setting up companies in the UK is failing to adequately research their chosen business structure and associated legal obligations before formally registering their business with Companies House. Another mistake is not seeking professional advice from an experienced lawyer or accountant; this can be invaluable when navigating complex regulations and laws related to starting up a business in any jurisdiction. Finally, people sometimes underestimate how much time and effort goes into running their own business; it’s important to be realistic about what’s involved so that you don’t become overwhelmed once things get underway!

Example dispute

Possible Lawsuits Regarding Company Formation

• Review of company formation documents for errors or omissions in formation process
• Allegations of breach of fiduciary duty or other statutory or contractual duties
• Malicious or negligent misrepresentation of company formation documents
• Claims of fraud or deceptive business practices
• Claims of wrongful termination of employees or contracts
• Claims of breach of contract
• Claims of negligent or intentional interference with contractual relations
• Claims of violation of consumer protection laws
• Claims of negligence in the formation process
• Claims of negligent or intentional misrepresentation of company formation documents
• Claims of unfair competition
• Claims of unfair labor practices
• Claims of misappropriation of trade secrets
• Claims of breach of fiduciary duty
• Claims of negligence in the formation process
• Claims of unjust enrichment
• Claims of negligent or intentional mismanagement
• Claims of breach of directors’ duties
• Claims of breach of warranty
• Claims of tortious interference with contract
• Claims of civil conspiracy
• Claims of personal injury
• Claims of copyright infringement
• Claims of patent infringement
• Claims of trademark infringement
• Calculation of damages for any of the above claims, including lost profits, emotional distress, or punitive damages

Templates available (free to use)

Amended Articles Of Association For Public Limited Companies
Amended Optional Articles Of Association For Public Limited Companies
Articles Of Association For Joint Venture Company With Individual Shareholders
Articles Of Association For Joint Venture Deadlock
Articles Of Association For Joint Ventures With Non Equal Shareholdings
Articles Of Association Freehold Residents Management Company
Member Resolution To Amend Articles Of Association
Model Articles Of Association Bvca
Sample Articles Of Association Non Leveraged Vc Equity Investment
Sample Articles Of Association Private Equity Buyout Vehicle
Sample Articles Of Association Private Limited By Guarantee
Short Form Articles Of Association Private Company Limited By Shares
Subsidiary Articles Of Association Private Limited
Written Resolution To Amend Articles Of Association To Remove Director Discretion Where Share Security Is Taken

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