Most people in UK go for Limited companies. There are different reasons for this. Though forming a sole proprietorship takes less of paper work, in reality if you are a newcomer to this field, it is better to start your business as a limited liability company. The two major advantages of Limited company are reduction in the amount of tax that is expected of your company and greater protection of your personal assets if and when the company runs into debts.
The name is the primary thing that one decides upon when you are starting a company. The Companies House in UK maintains a list of all the companies and you can simply go to their website and check whether your ‘name’ already exits. But whatever the name might be, it should always end with the world Limited or its abbreviation ‘Ltd.’ A Limited company also needs two important posts from the very start. The first of these two is called the ‘director’. The other one is the ‘company secretary’. The secretary may also be the director of the company but then he or she cannot be the sole director. The secretary of the company is vital for the proper working of the company and in this respect he is more powerful than the director. He is expected to submit annual returns and tax details to the Companies House. He is entitled to look after the day to day functioning of the company.
When two people form a Limited company, normally the two responsibilities are shared by the two people respectively. Often the role of the director is also given to he spouse or family members of the secretary. There is also another option available to the new businessmen. They can use the professional services of a third party which does the same work that a conventional secretary does for a company. They do this with utmost sincerity for a nominal annual fee. The next function is to decide on the number of shares of your new company and the price of each share in the market. These shares are sold to people who want to invest in this company. They normally become the share holders of the company and earn dividends on the profit of the company. The unsold shares are called ‘unallocated shares’.
There is something called an “off the shelf company”. These are ready made companies formed by the company formation agents. You simply have to pay them the necessary fee and transfer the company to your name. However, there are certain problems like a predetermined name for the company which cannot be avoided. You can of course change the name officially with a fee.
To sum up starting a business in UK requires knowledge of certain rules and regulations. So make sure you know them before you start functioning.