Do you hesitate to start your own business in the UK because you think the legal process might be very lengthy? The incorporation of a business in the US is not a lengthy or complex process. The main reason why you need to incorporate your business is it gets recognized as a distinct entity. It provides your assets the protection from the liability of the business.
How to incorporate my business?
Here the process has been broken down into simple steps:
1. Selecting a company structure: There are around four business structures you can choose from. You can go for the structure that benefits you the most. Most UK entrepreneurs’ first preference is “‘private company limited by shares’ to enjoy tax benefits. For instance, the director can withdraw his income from the company’s dividend that saves them tax.
2. Register the company’s name: The first step of registering any company is registering the name. It serves as the company’s identity. Conduct small research on the name of your competitor companies and get an idea of what name you should go with. But do not copy the name. Keep it sensible, short, and unique. Once all the legal documentation formalities are complied with, the Registrar permits the adoption of the name within three months.
3. Enter relevant information related to the company: When you are incorporating a business in the UK, all the crucial information related to your company has to be made available to the public.
You need to provide the following details:
Registered office: This is the address where your company is registered. The address has to be in the UK. Companies House and HMRC will be sending mail at this address. The address should be such that the company’s directors are reachable easily.
Company directors: The minimum requirement for incorporation in business is the presence of at least one director. You have to provide information regarding the
name, date of birth, and residential address of the director/s to the Companies House.
Shareholders: The presence of at least one shareholder is compulsory for every company incorporated in the UK. This person can be the same as the director. The Companies House will ask for the shareholder’s details like name, date of birth, and residential address.
Allocate company shares: One of the most crucial steps in incorporating a company is allocating shares to the shareholders. You can even allot one share per shareholder worth 1.39 USD.
4. Completing the Memorandum and Articles of Association: A memorandum contains the names of all the people example initial shareholders that were available at the time when the company was found. The article of association consists of all the set of rules that are required to run an organisation. The promoters with the help of the Registrar of Companies can draft and draw up the articles of association and memorandum. Once the documents have been vetted with the Registrar of Companies, they need to be printed.
Every subscriber or their representative has to individually sign the articles of association for them to be considered valid. One of the criteria is that the text in both articles has to be divided into paragraphs and organized chronologically.
5. WebFiling services
Web filing service is a secured system that companies use to incorporate their company online by applying the internet. The service is available every day of the week 24*7. To register for this service, you need to follow these three simple steps:
- Applying for a security code
- Applying for an authentication code
- Confirming registration
By filing online:
- You will save your company’s time and money
- You will get instant confirmation
- The chances of application getting rejected and filing penalty is lesser
- You can get access to additional online services
You can also submit the required documents at the Companies house. All of them will go through the necessary checks, and if they satisfy the appropriate examination, a certificate of incorporation will be issued.
The documents are:
- Memorandum of association
- Articles of association
- Application to register a company
- Additional information if the application includes a sensitive word or information
What are the advantages and disadvantages of incorporation?
Incorporating a company has both its advantages and disadvantages. Let us take a look at them:
What are the advantages of incorporation/ what are the benefits of incorporation?
- Tax benefits: The director of an incorporated company can enjoy tax benefits to a great extent. They can take out a small portion of the income from the business. It will drastically lower the cost of National Insurance Contributions (NICs) because the dividend payment of an incorporated company is taxed separately.
- Your company will be a separate entity: Your company will be able to have its business bank account, assets, loans, credit agreements. It protects the business owner’s assets.
- Limited liability protection: Any financial losses that your company suffers from will be paid by your business. The business owner has no responsibility for paying off debts.
- Better financing: When a company is incorporated, opting for business loans, credit, and other financing options are much more convenient in terms of interest rates and repayment terms.
What are the disadvantages of incorporation?
- Payment of incorporation fee
- An undischarged bankrupt or a disqualified director cannot incorporate a company
- All the information related to your company will be available publicly.
- Strict procedure for withdrawing money from the business.
Difference between incorporation number and the business number
The incorporation number is the number assigned to the company at the time of incorporation. Business owners use this number to file legal documents. The business number is assigned to serve as an identity mark for the business. This number is used to refer to the company in most documents.
What is certificate of incorporation and the business license
A certificate of incorporation is the document that confirms the existence of the newly incorporated company and contains crucial details like company registration number and date of incorporation.
The business license is the official document issued by an affiliated body or government agency. It serves as permission for the incorporated to conduct its activities within its jurisdiction.
You cannot avoid the incorporation process if you want to run a business in the UK. Incorporating a business in the UK is rather simpler than in most parts of the world. We have explained the entire process in a simplified manner and all you need to do is follow these steps.