Establishing a company in the UK

The most popular vehicle for a business in the UK is a private limited company. The main reason for its popularity is the fact that it limits the liability of the person or group of people interested in establishing the business. In theory this means that should the company business fail for some reason, only the assets owned by or tied to the business are at risk of being lost. For example, if Takashi, a homeowner, establishes a business under the ownership of a company using an unsecured loan in the name of the company, even if the business fails with the loan remaining unpaid, Takashi’s home is safe from the hands of the company’s creditors. The same would not be true if Takashi set up the business in his own name as opposed to in a company name.

There are some simple formalities to follow in order to create a company. There need only be one person involved and that person does not even have to be a UK resident! If Takashi, a Japanese national, wanted to form his own company in the UK he would need to follow the procedure for registering it with “Companies House”, the UK company registrar for a fee of only £15 if carried out online. The main requirements for a successful registration are as follows:

Choosing the company name

Takashi must choose a name which no other company has. He can check whether the name he wants has already been taken by carrying out a simple search at Companies House

Choosing a director

A UK company must have at least one director. The directors have the power to bind the company to agreements so must be chosen carefully. In our example, Takashi chooses himself.

Choosing shareholders

The shareholders are the legal owners of the company. The company must have at least one share and at least one person to hold that share. In our example if Takashi is the sole company shareholder and he owns the company’s only share, then he legally owns 100% of the company.

Choosing the company’s constitution

Just like a country, a company must have a constitution – this is called the “Articles of Association” (or “Articles”) A company must have Articles in order to be registered with Companies House. However, if Takashi does not want to take the time to create his own Articles, Companies House will provide his company a default set. Click here to see what this would look like. The Articles stipulates how the directors must run the company and also powers held by shareholders (UK company law specifies certain rules which all companies must follow in respect of the relationship between directors, shareholders and companies, but most of these rules can be varied in the Articles)

Choosing the company’s registered office

This address must be in the UK, but does not necessarily have to be an actual place of business for the company. For example, it can be Takashi’s solicitor’s office.

If you would like assistance with the formalities of establishing a company in the UK please contact me.