An Introduction to Company Formation in the UK

If you have come up with a business idea for a new company, your next step is company formation. Company formation in the UK creates a separate legal entity that protects your personal assets and adds credibility to your business. This guide explains how to choose the right structure, prepare the required details and complete registration with Companies House.

What Is Company Formation?

Company formation, sometimes referred to as company incorporation, is simply the process of registering a company in the UK with the official registrar of companies. Your company will be a legal entity that is entirely separate from you as the owner, providing limited liability protection, enhanced credibility, and tax benefits. Once formed, your company can hire employees, enter into business contracts in its own right, and open a corporate bank account to facilitate financial transactions.

Why Incorporate a Company?

Businesses incorporate mainly for limited liability, credibility, access to capital and tax efficiency. Incorporating a company is not the only way to run a business in the UK, but it offers substantial benefits over other approaches such as self-employment (‘sole trader‘), limited liability partnerships (LLPs), social enterprises, overseas companies, and unincorporated associations. If you are unsure which is best for your needs, we recommend speaking to an accountant or tax advisor in the UK. If you require, we can introduce you to a trusted accountant in the UK at no cost. The most popular company type in the UK is a private company limited by shares.

There are several compelling reasons to incorporate a limited company in the UK:

• Limited liability – limited liability means that your personal assets are protected from business creditors.
• Credibility – operating a registered limited company will enhance your reputation with customers, suppliers, and investors.
• Access to capital – as a limited company, you will have the ability to raise funds by issuing shares to investors. If you go public, your business can raise capital from other public shareholders. 
• Tax efficiency – limited companies pay Corporation Tax on profits, which is often lower than the Income Tax rates that sole traders pay.

Prior to Company Formation

1. Choose Your Business Structure

There are several different types of company structures available when incorporating a company in the UK. The most common options are:

• Private Limited Company (Ltd) – limited companies are suitable for most small businesses, offering limited liability for shareholders.
• Public Limited Company (PLC) – public limited companies are intended for larger businesses that wish to sell shares to the public.
• Limited Liability Partnership (LLP) – an LLP is typically chosen by professional service providers such as law firms, architects, doctors and dentists.

2. Select a Company Name

Once you have decided on your business structure, the next step is to choose a company name. This step should not be rushed. Not only will your company name help to establish your brand, but the name you adopt must be unique and comply with the Companies House guidelines. 

Since there are a number of things to consider when selecting a company name, here are some of our top recommendations:

• Keep it short, simple, and easy to remember.
• Choose a name that reflects the type of business that you will be doing.
• Check that your business name is not the ‘same as’ or ‘too like’ an already registered company. If you are unsure whether your company name meets these criteria, you can check using our free company name check tool. 
• Check the list of existing trademarks. 
• Ensure that the name you choose does not contain any protected words such as ‘royal’ or ‘trust’. If you want to use a protected word in your company name, you will need permission from Companies House first.

3. Choose Your Company Directors and Company Secretary

Before you register your company, you will need to decide who will hold the role of company director and company secretary. You must appoint at least one company director, but there is no legal requirement to have a company secretary. 

As a company director, you must adhere to the articles of association, keep company records and report changes, file company accounts and Company Tax Returns, and pay Corporation Tax, among other duties and obligations.

4. Registered Office and Service Address

Your company must have a registered office address in the UK to be used for official correspondence (e.g. letters from HMRC or Companies House). As a director, you must also provide a service address, which can differ from the registered office address (remember, these addresses are listed publicly). Your UK-based accountant will be able to explain the rules of company addresses to ensure that you are adhering to them. You will also need to decide on a registered email address for your company. 

5. Identify People with Significant Control (PSC) 

When you register your company, you will need to inform Companies House of any persons with significant control (PSC) over your company, otherwise referred to as ‘beneficial owners’. This includes anyone with more than 25% of shares in the company, more than 25% of the voting rights in the company, or the right to appoint or remove the majority of the board of directors. 

6. Prepare Your Memorandum and Articles of Association

During the company formation process, you will need to prepare and submit key documents, including your Memorandum of Association and Articles of Association. A Memorandum of Association is a legal statement signed by shareholders or guarantors agreeing to form the company. Articles of Association set out how the company will be run, including rules for directors, shareholders, and meetings​. A company formation agent can help you create these documents. 

7. Choose Your SIC Code

You will be asked to provide a standard industry classification (SIC) code when you register your company. This denotes the area of business that you operate in (i.e. the sector), e.g.: 

• 86101 Hospital activities
• 86102 Medical nursing home activities
• 86210 General medical practice activities
• 86220 Specialists medical practice activities

The Company Formation Process

Once you have gathered all of the necessary information to set up your company, you can prepare and submit your incorporation application in one of two ways: directly with Companies House or through a company formation agent. Whichever route you choose, every new director and person with significant control must verify their identity with Companies House before the company can be registered.

Registering Directly with Companies House

To use the Companies House online service, you will need:

• a GOV.UK One Login account;
• the Companies House personal code of each director, issued once their identity has been verified.

During registration, you will also create a separate Government Gateway user ID and password for your company, which HMRC uses for Corporation Tax; a personal Government Gateway ID cannot be used. Companies registered through this combined service are usually set up for Corporation Tax at the same time. It is also possible to apply by post using form IN01, although postal applications cost more and take longer to process.

Registering Through a Company Formation Agent

A company formation agent prepares your incorporation application, checks it for errors and files it electronically with Companies House on your behalf, which reduces the risk of rejection. As an Authorised Corporate Service Provider, the agent can also verify the identity of directors and persons with significant control as part of the same process, and can help you with practical decisions such as your company name, share structure and SIC code.

Once your company formation application has been approved, you will receive a Certificate of Incorporation containing your company registration number as proof that your company is now a legally registered entity. Using online incorporation services such as that provided by Uniwide Formations means that you should receive your Certificate of Incorporation on the same day, depending on the time at which your application is submitted. If your company was not set up for Corporation Tax during registration, you must register with HMRC within three months of starting to do business.

What to Do After Company Formation

After you have set up your company and you have received your Certificate of Incorporation, there are further steps that you may need to take before you can start to operate, such as registering for VAT. If your taxable turnover exceeds the VAT threshold (currently £90,000) in any 12-month period, or you expect it to do so within the next 30 days, you must register for VAT with HMRC. Once registered for VAT, you will charge your customers VAT at the correct rate (typically 20%). At Uniwide Formations, we offer a VAT registration service to make the process as quick and simple as possible. 

Your company will also need to meet its annual filing requirements with Companies House, providing a detailed record of your business’s financial performance. In addition, a confirmation statement must be submitted annually to verify that company information is accurate and up to date.

Summary of Company Incorporation Requirements

The table below brings together the key requirements for incorporating a company in the UK, from choosing a name to registering for Corporation Tax.

Frequently Asked Questions About Forming a UK Company

Starting Your New Company the Right Way

By following the correct process for registering your company with Companies House and staying compliant with your tax and reporting obligations, you will benefit from limited liability, increased credibility, and potential tax savings. Whether you decide to handle the process yourself or use a company formation service, the rewards of incorporating a company are significant. For business people who are unfamiliar with the process, using a specialist such as Uniwide Formations can make it much easier and faster. We offer a range of company formation packages and services designed to make your business journey as streamlined and efficient as possible. We even offer a package for non-UK residents.

These are just some of the basics that you need to know about company formation in the United Kingdom. If you would like to set up your limited company, then you are most welcome to speak with our specialists.