Company registration in the UK is a legal requirement before any business is allowed to operate as a company, this is called an incorporation. In order to be incorporated in England and Wales the company must be registered with the Registrar of Companies at Companies House.
Companies can take various legal forms – these includes private companies limited by shares (Ltd), private companies not limited by shares (unlimited private companies) or public companies limited by shares (Plc). As the vast majority of businesses – especially small ones and start-ups – will be private companies limited by shares we will primarily focus on their registration requirements.
What is a Company Limited by Shares?
A limited company is one in which shareholders cannot usually be held liable to indemnify the debts of the company. The shareholders will have limited their liability for the obligations of the company to the price of the shares they bought.
So, to put it simply in a limited company the most a shareholder can be held liable for the debts and obligations of the company is the amount he or she initially paid for the shares which he or she owns in that company (or in some cases still has to pay for ).
What is the difference between Private and Public Companies?
A private company is one which cannot offer shares to the general public – so for example it cannot sell its shares on stock markets.
As you would expect, public companies on the other hand can sell shares publicly. To register a public company there are extra burdens and requirements imposed due to the public nature of their existence. This means that they must:
- Have at least two directors – one of which must be an individual and not an institutional shareholder.
- Require all individual directors be aged 16 or over
- Have at least one qualified secretary.
What Are the Benefits of Limited Liability?
During the battle for legislative acceptance of the principal of limited liability in the middle of the 19th Century, the argument which seems to have weighed most heavily with the legislator is that limited liability would facilitate investment by members of the public – who were not professional investors – of their surplus funds into large capital projects.
This logical still rings true in the 21st Century. Having a company with limited liability stimulates investment and entrepreneurship, as shareholders know that in a worst case scenario the most that they can potentially lose is the amount they invested in the shares. The alternative would be that they would have unlimited liability for the debts of the company, and that any creditors of the company could go after their wealth personally. Clearly not a very appealing prospect considering that companies can amass huge amounts of liabilities!
Therefore to put it frankly, limited liability companies help shift some of the risk from the owners of the capital, the shareholders, to the creditors. Of course, one must not forget that in many instances the whole issue of limited liability may be obsolete. What I mean to say by this is that in a vast majority of cases where creditors are dealing with small businesses and start-ups, businesses which characteristically do not have many assets to their name, it is not uncommon for them to require the personal guarantees of the shareholders in question. In such situations where the shareholders have given personal guarantees the limited liability status of the company is irrelevant – the creditor will have essentially circumvented the effect through a private agreement with the shareholders.
What will you need to Register?
In order to register a company in the UK you will need the following documents:
- Application form IN01 to register a company
- Memorandum of Association
- Articles of Association
If you are looking to establish a UK company, the Limited Company Incorporation solution from eOffice is one of the easiest ways to do so. We can set-up a UK Limited company and VAT registration for you in an efficient and cost effective way. If you want more information don’t hesitate to email us or call.