Are you looking to start a limited company in 2021 then this blog is for you? As business consultants, we spent all day long helping business owners on their journey, and of course, one massive part of us helping people on the 1st little start the journey of forming a limited company. So 4 main decisions you've got to make when you come to form the limited company a little bit on the practicalities then of how you can get it formed and at the end, we will talk about on things like bank accounts for the company & getting paid.
Before we get into this there are a couple of things I want to talk about the 1st one is to make sure that should you be a limited company? If Yes!
1- What a limited company is & what should be the name of your limited company?
Realistically it's just a piece of paper at the company's house that says this legal thing exists to exist in its own right it can own stuff and can buy things in its name and as a result, it's what it was a separate legal entity. You know it exists and that means from an owner’s point of view it's good because let's say something goes bad in the business property of the business will be confiscated rather than your personal property like your house, car, shares & a lot more.
You can call it to a degree whatever you like and when I say to it degree some words are restricted. so that with a company there's a register a company's house so you can actually go find this if you Google company's housing BETA you'll see you can just type in a search bar and it brings up the different company names so what you should do is when you decide what you'd like to call it to go on there checking the name is not already taken if there's a very close name you might also think about changing it because it is possible that you might be able to form it and then you'll be asked to change it later that can be frustrating so do make sure that it's all there's. Your limited company name doesn’t have to be fancy or have a fancy logo. Later on, you can decide your trading name whatever you like, and get on with it but your registration number and registered name should be mentioned on the receipt somewhere.
You can always change your registered name but it will show as history on your company page & that kind of seems fishy.
2- Your Registered Office Address.
You're going to be asked for a registered office address now this is an address that's going to be on the public record at Company's House so whatever you put in there it's going to be visible to anyone. You might have an address that isn't your home address as a registered officer addresses because of protection there and the way you do that is you'll find companies selling virtual addresses & it's not a lot of money to have that address and those places will offer you mail forward to you and by default that's the place will be where the company hold its important documents.
3- Whose gonna own it, Who is going to be the shareholders of this limited company?
If you want to set up as a business in the UK, there are 3 main types of legal structures:
Sole Trader
Limited by Shares
Limited by Guarantee
The most common ones are the Sole Trader and a limited company by shares.
Sole Trader:
A sole Trader is a form of business owned and run by one individual, it comprises only one person.
Benefits of Sole Trader: The most significant advantage of this type of business is that you are more in control. As you are the only owner, you manage all aspects of your company and make all decisions. It also means that you keep all profits to yourself at the end of each year.
Disadvantages of Sole Trader: However, there are also some downsides to this type of business. For example, you take on unlimited liability for your company's debts, which means that if you have a bad year and end up in debt, creditors can pursue your assets to pay off that debt. Additionally, tax is usually higher for sole traders than for limited companies. Another disadvantage is that it's difficult for sole traders to raise capital or gain investment from other sources because they don't have any share certificates to offer as collateral.
Limited By Shares: Companies limited by shares are owned by shareholders who are liable to the extent of the money they have invested in the company. The shareholders do not have unlimited liability and their liability is limited to the amount of money they have invested into the company.
If a shareholder owns more than 50% of each class of shares, this individual is known as a ‘member’. The member must inform Companies House if their company has only one class of shares, ordinary shares.
Benefits of Limited By Shares: Limited liability – your personal assets are not at risk if the business fails. It’s easy to transfer ownership via sale of shares. Shareholders enjoy certain rights and privileges that aren’t available to sole traders and partnerships, such as voting rights, dividends and public funding opportunities. It is its own legal entity, so if the company gets into debt or needs to pay damages then the owners aren't responsible, they only stand to lose their investment in the company (i.e., their shares). This makes them less risky than sole traders who are liable for everything that happens within their businesses.
Disadvantages of Limited By Shares: A limited company is required to hold an annual general meeting (AGM) – you must also submit an annual return to Companies House each year. Your business may be liable for corporation tax. There are specific legal requirements for setting up a limited company. You will have to register with HM Revenue & Customs (HMRC) as self-employed and fill out a self-assessment tax return every year to report your income and pay tax on your profits. Depending on how much money you make it might be worth employing an accountant to help with this.
4- Bank Account Setup & Best Banks For Business Account in the UK!
The UK has a very business-friendly economy. Many people from around the world choose to do business in the UK. If you are also planning to start a business in the UK, then you should know about the process of bank account setup for your company.
It is not difficult to open a bank account for your business in UK. There are many banks operating in UK and most of them offer special support and services for businesses. However, some banks are better than others. Here is the information that you need to know about opening a bank account for your business.
How do I open a bank account in the UK for my Company?
The process of opening a bank account depends on the type of company that you want to open. If you want to open a limited company, then you will have to get approval from Companies House and then submit it to the bank along with other documents (which include identification documents). When you contact the company directly, they will tell you what documents they need from your side. If you don’t have all these documents ready, then it can take up to 6 weeks for your application to be processed by the bank.
Here are a few bank options that you can consider!
Barclays is one of the good banks in the United Kingdom and provides some great features for businesses. Whereas the processing time for opening a bank account can be at least 3-4 weeks if you decide to go with Barclays due to COVID-19 restrictions and whatnot.
If you wanna be up and running sooner than this time frame. Starling Bank is one of the good options as they offer online registration and quick processing time.
They will ask for some basic information like details about your company. Type of company. How the shares are divided, among partners. Company's UTR number. (Unique Tax Reference Number). Your monthly turnover, Yearly Turnover. GOVT issued documents.
If you are opening a sole proprietorship or partnership, then there is less paperwork involved.