Points to consider about UK company formation and administration

The basic principle behind the limited company is that it allows you to trade through a separate legal entity, so that the company is solely liable for the business's debts, and your personal assets such as your house are not at risk. 

 

Trading through a limited company should also help you to raise your business reputation, particularly once you have traded for a few years, as people considering dealing with you will be able to see your business track record by checking the Companies House database. Some people prefer dealing with limited companies for this reason. 

 

Limited companies also have tax advantages, particularly as if you pay yourself in the form of dividends on your shares in the company rather than salary, as dividends are not liable for National Insurance. For advice on your particular situation you should consult an accountant - some are listed under 'Other Useful Contacts'.

                                                 

Company formation also has pitfalls - we at Dudley Miles Company Services Limited pride ourselves on assisting our clients so as to make the process as simple and painless as possible.  

1. Rules regarding company names

Companies House guidance regarding the rules about company names are complex, and their guidance booklet is available here but a brief summary is given below.
 

2. Similar names
 

Most people forming a company will know that you cannot have the same name as an already existing company. (You can check what names have already gone here.) But people sometimes slip up because they do not understand the Companies House rules for what counts as a duplicate name. Spaces and punctuation are ignored, so if there is a company called Greenbank Limited, you cannot have Green Bank Limited or Green-Bank Limited. 'The' at the beginning of a name and 'Company', 'Co.' 'and Company' and 'and Co.' at the end of a name are all ignored, so Greenbank Limited will be treated as a duplicate of The Greenbank Company Limited. 

 

A name will be rejected if it is the 'same as' an existing name unless it is to be part of the same group of companies as the existing company, and the existing company supplies a letter of non-objection. Examples of 'same as' words (as defined by the 2006 Companies Act) are names which differ only by 's' at the end of the name, or words such as Services, International, GB, UK and Com. For a full list of 'same as' words see here.

In addition, if a name is not rejected under the 'same as' rule, but it has a similar name to an existing company, the existing company has twelve months to object that the name is 'too like'. If the objection is upheld, the new company will be required to change its name. If names differ by longer descriptive words or a town, an objection would be unlikely to be upheld.
 

In general, having a similar name to a small company is unlikely to be a problem unless the existing company is in the same area or trading in the same field, but large companies often employ solicitors to check for any companies formed with a similar name, and write threatening letters demanding a change of name. 

 

It is also advisable to check whether your proposed name is identical or similar to an existing trade mark, and you can check this at the Trade Marks Register Index.
 

3. Sensitive words
 

Some words such as International, group, holdings and association are sensitive. Each sensitive word has its own rules about the requirements for being allowed to use it in a name. Further details are available here.

The rules on 'same as' and sensitive words are complicated, and we are always happy to assist with advice.

4. Formation agents
 

If you use a formation agent, check exactly what package he is supplying. For example, many companies are formed with a nominee shareholder (or shareholders), and the agent should supply a stock transfer form with the correct wording to transfer the share over to the bona fide shareholder. However, some agents supply instead a renunciation of the incorporation share, which does not legally transfer it. The agent should also supply a Register and Share Certificates, but a company seal is no longer legally required.
 

It is also advisable to check whether there are any hidden extras in the price. Does it include VAT and statutory fees? 
 

5. Lodging director and secretary appointments
 

Private limited companies are not required to appoint a company secretary, although if a secretary is appointed Companies House must  be notified. Companies must have at least one director who is a person, not a company.

 

If your company is incorporated with nominee officers, Companies House forms appointing the director(s) and (if applicable) secretary should be lodged within two weeks. The forms are available here.

 

People often find that they cannot open a bank account because the appointments have not been lodged, and there will then be a delay of up to two weeks for the forms to be completed and lodged and Companies House to process them. People often fill in the forms incorrectly, resulting in rejection by Companies House and further delay. If we form a company for you, we will check that the forms have been correctly completed before lodging them.
 

If you need to open a bank account urgently, it is better to form the company with the bona fide officers appointed at incorporation. We form companies electronically, which means that they are almost always formed within one working day, and the appointments will be available on the Companies House web site the next day for inspection by the bank.
 

6. Keeping the papers safe
 

Make sure you put your company documentation where you can find it later! People sometimes find that they cannot open a bank account because they have lost their documents, and they then have to pay the formation agent to produce a duplicate set. 
 

7. Issuing more shares
 

Companies with nominee officers are normally formed with one or two shares issued initially, and Companies House form SH01 may then be used to issue further shares. A common mistake people make is to forget the incorporation share in deciding how many shares to issue, so that for example if it is desired to have 100 shares they issue 100, making 101 in total, instead of issuing a further 99 to bring the total to 100.
 

8. Changing your address
 

Remember to notify Companies House on form AD01 if you change your Registered Office address. Companies are sometimes struck off because Companies House could not trace them, and the directors then have to go to the time and expense of getting the company restored to the Register.
 

9. Lodging your accounts

 

Make sure you lodge your accounts on time. Companies House will notify you of the date when they are due, and if they are late you will be fined £150 for up to a month overdue, and higher amounts if they are later still. 

It is advisable to lodge them in plenty of time, so that if they are rejected there is still time to correct them and get them in on time. It is also a good idea to check that they have been accepted as you may find yourself liable for the penalty for late filing if you do not realise that they have gone astray in the post. You can confirm that the accounts have been accepted by checking the date of the latest accounts on the company file at Companies House.  

 

10. Lodging your Annual Return
 

Send your Annual Return in at the right time. This is nomally done online now as the charge for filing online on the Companies House web site is only £15 compared with £30 for a paper return. We can lodge it on your behalf for £30 (including payment of the £15 Companies House fee). There is no fine for lodging it late, but it does not give a good impression if people checking the company record find 'OVERDUE' on it.