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Starting your limited company is an exciting time but it is also a big step and with the vast amount of information available it can appear to be complex.

It is actually quite the opposite, as it is now easier than ever to form a company and register it with the authorities.

There are no longer lengthy forms to complete as the whole process can be done online without the need of original documents or signatures.

Most people use an approved Companies House Formation Agent to assist in the registration of their company. By using a Formation Agent you can be assured that the company is registered correctly. Some Formation Agents also offer packages whereby the company documents which are required legally are produced on your behalf including company register, minutes of first meeting and share certificates.

There are some common mistakes they can potentially be made when starting a company, here we will look at the main ones and see how they can be avoided:

Company Name

This is the easiest part of the process and you have probably already been thinking about your company name for a while before you are actually ready to form your company.

However we have found that people are generally not aware that some words can be classed as sensitive and require supporting evidence, words like ‘Queen’ and ‘University’.

This is certainly something to consider when deciding on your company name as your company will be rejected for this reason. Most Formation Agents have the ability to check your company name before you pay for the incorporation, you can check the availability of a company name here: https://www.cfsformations.com. However, it can never be 100% guaranteed that your name is available as it is at the discretion of Companies House.

You can view a full list of all the sensitive words here: https://www.cfsformations.com/sensitive-words/sensitive-words-intro

Forming the Wrong Company

The most popular choice when starting a business is a Limited by Shares Company. This is because the liability of the shareholders or creditors of the company is limited to the capital originally invested. It makes it a good choice when initially starting out i.e. the value of the shares, please see the section ‘issuing shares’ for more information.

However, as there are a number of different companies available you need to ensure that you carry out research to see which what the best company type is for you and if necessary seek advice from your accountant.

The company types available are:

LTD (Limited) Company 

This is the most popular UK Company type as it protects the Shareholder’s personal interests, should the company end up in difficulties, provided they do not give any personal guarantees. As the company is a separate legal entity from the people running the company they will be protected from any personal liability for the company’s debts.

LLP (Limited Liability Partnership)

An LLP is a partnership which is registered with Partners or Members. The Partners or Members are the owners of the partnership. This type of partnership is commonly used by Solicitors and Accountants as each partner will have protected limited liability. The partners do not have any responsibility for the partnerships debts. The members of the LLP can agree between themselves how the partnership will be managed and how the capital will be owned and profits shared. These arrangements can be changed simply by an agreement between the members at any time.

LTD (Limited) by Guarantee

Limited by Guarantee Companies are commonly used for charities or companies where any profit made is kept within the company, and are solely used to benefit the company. 

PLC Company (Public Limited Company)

This type of company is appropriate for larger businesses where shares are intended to be available to the general public. This is the only type of company which may sell their shares to the public. 

Flat Management / Property Management Company

A Property Management Company is a particular type of company which will manage a property that has been divided into separate units, each unit being owned separately. In many cases the most important use of the company is to hold the title of the overall property and manage the communal areas of the property.

Issuing Shares

If you chose a company type that requires shares to be issued, this must be done at the incorporation stage. A mistake that is made on a regular basis is not realising that any shares within the company must be issued to a shareholder(s). This changed with the new Companies Act 2006 that came into effect on 1st October 2009. Most companies when starting out issue just one share usually with a value of £1. This share can either be paid or unpaid, if paid is selected then the £1 share must be paid into a bank account – this however can be done after the company is incorporated.

Once the company is incorporated a share certificate must be issued to the shareholder to represent the shares they have been issued.

You can view a sample copy of a share certificate here https://www.cfsformations.com/index.php?Itemid=716&view=sample-documentation-downloads&option=com_incorporations.

Company Address

There are three address to be aware of when forming your new company. Not knowing which of these address are visible at Companies House can cause problems once the company has been incorporated as most people wish to keep their residential address private. Below is an explanation of each address:

Registered Office Address

This is the official address of your company and is shown on public records, the location of the address must be in the UK. Companies House and HMRC use the Registered Office Address to get in touch with the company, and this is usually the address where all correspondence is sent. The location of the Registered Office will depend on where you would like your company to be located, for example, if you would like to set up a Scottish Company, your Registered Office Address must be located in Scotland.        
Many formation agents provide a Registered Office facility, whereby their address would show on public records instead of yours. Any mail which is received for your company would then be forwarded onto you

Correspondence Address

The Correspondence Address, also known as Service Address is the official address of the Director / Member within the company. The address is shown on public records, and if Companies House or HMRC would like to get in touch with the Director of the company they would use this address. The address does not need to be located in the UK, it can be located anywhere in the world.
If you do not wish your address to be shown on public records, many formation agents provide a correspondence address whereby their address would show on public records instead of yours.

Residential Address

This is the actual physical address of a Director / Member within a company, it must be the address where the person lives. The Residential Address is not shown on public records so nobody has access to the address. It does not need to be located in the UK, it can be located anywhere in the world. 

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