Tuesday, 15 April 2014

Setting up a Private Limited Company

After deciding that our company is going to be a Private Limited company, I have decided to look further into how to set up a business specifically for a PLC. This will give me more knowledge so that I can be prepared in the presentation for any questions to be asked and I can also get a better understanding of how a Private Limited Company will work.

You can set up a private limited company to run your business. You must appoint people to run the company (called ‘directors’) and register (or ‘incorporate’) it with Companies House.

Once the company is registered you’ll get a ‘Certificate of Incorporation’. This confirms the company legally exists and shows the company number and date of formation.

Sole traders are personally responsible for their business debts, but the liability in a private company is usually limited to the shareholders. The liability depends on the type of company being created.
A private company limited by shares is owned by its members (called shareholders). The liability of each member is limited to the original value of the shares issued to them, but not paid for. 
A private company limited by guarantee means the members of the company financially back it up to an amount agreed previously, if things go wrong. Its members aren’t called shareholders. 

Register your company.
Before you register.
All limited companies must be registered (incorporated) with Companies House. To do this you need:
  • the company’s name and registered address
  • at least one director
  • at least one shareholder
  • details of the company’s shares - known as ‘memorandum of association’
  • rules about how the company is run - known as ‘articles of association’
Fees and how long it takes.

Online takes 48 hours and costs £15 (paid by debit or credit card or Paypal).

Postal applications take 8 to 10 days and cost £40 (paid by cheque made out to ‘Companies House’). You can get a same day service by post. It costs £100 but you must get your application to Companies House by 3pm. 

Company Name and Address.
Company name.

The names of all private limited companies in the UK must end in either ‘Limited’ or ‘Ltd’ and the name can’t:

  • be the same as any other name on the Companies House index of names
  • contain a ‘sensitive’ word or expression unless you get permission
  • suggest a connection with government or local authorities
  • be offensive

Registered Address.
The registered office address is where official communications are sent - eg letters from Companies House and HM Revenue & Customs. The address doesn’t have to be where you operate your business from but it must be:
  • a physical address
  • in the same country that your company is registered in - eg a company registered in Wales must have a registered address in Wales
You can use a PO Box, but you must also include a physical address and postcode eg PO Box 123, 1 High Street, Anytown, SW1A 1AA.
You can use your home address or the address of the person who will manage your Corporation Tax if these addresses meet the rules above.

Directors and Company Secretary.

When you register your company it must have at least 1 director.

A director is legally responsible for running the company. A director must be older than 16 and not be someone disqualified from being a director.

You can make another company a director - but at least 1 of your company’s directors must be an individual.

Directors have responsibilities that include making sure the company is run properly.

Company secretaries.

You don’t need a company secretary for a private limited company. Some companies use them to take on some of the director’s responsibilities.

The company secretary can be a director but can’t be:

  • the company’s auditor
  • an ‘undischarged bankrupt’ - unless they have permission from the court
The restrictions placed on a person when they’re made bankrupt usually end when they’re discharged. You can check if someone has been discharged using the Insolvency Register.

When you register a company you’ll need to make a ‘statement of capital’. This is:
  • the number of shares the company has and their total value - known as the company’s ‘share capital’
  • the names and addresses of all shareholders - known as ‘subscribers’ or ‘members’
Every limited company must have at least one shareholder. There’s no maximum number. Directors can be shareholders.

Role of shareholders.
Shareholders are owners of the company and they have certain rights eg, directors must get shareholders to vote and agree on changes to the company.

Articles of Association.
When you register your company you must have articles of association.
These are the rules about running the company that shareholders and ‘officers’ (directors or company secretary) have to agree to. For example, rules about how decisions that affect the company must be made and the role of shareholders in those decisions.
Most companies use standard (‘model’) articles - but you can change these or write your own as long as the company doesn’t break the law.

Set up your Company for Corporation Tax.
Within 3 months of starting up in business, you must give HM Revenue & Customs (HMRC) specific information about your company. You can do this once you’ve got your company’s Unique Taxpayer Reference.

HMRC will use this information to work out when your company must pay Corporation Tax.

What you must tell HMRC

You must tell HMRC:

  • the date you started in business
  • your company name and registered number
  • the main address where you do business from
  • what kind of business you do
  • the date you’ll make your annual accounts up to
  • if you’ve taken over a business or you’re part of a group
Any business activity counts as starting up, eg buying, selling, employing someone, advertising or renting a property.

Your company’s Unique Taxpayer Reference.

HMRC will send your company’s Unique Taxpayer Reference to your registered office address, usually within a few days of the company being registered (incorporated).

The letter tells you how to:

  • give HMRC the information they need about your company
  • set up your company’s HMRC online account for Company Tax Returns and Corporation Tax
Sublime ltd.
This research has been very useful for our presentation. I have learnt a lot about the specific requirements for a Public Limited Company. I have found that we will have to include ltd in our name as our company is limited. It is also really useful to know how Corporation Tax works as I was unsure about how it worked before doing any of this research. This is something that I will be including in the presentation, the information I have taken from researching into Private Limited Companies further than the information I already new.

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