There are 4 different types of UK company formation to choose from:

1. Sole Trader

This is a business that nearly always consists of just one person. The business is not registered with Companies House. This means the business is unincorporated and is not a Company in the legal definition of the term.

Liabilities & Assets

In the case of a Limited Company the person or persons owning the company are seen as legally separate from the company. This is not so with a Sole Trader. The person owning the company takes full responsibility for any money owed or any assets that the business owns. The business and the person being the same thing legally. This can risk your personal assets like your house which may be sought in the case of unaffordable business debts.

Regulating Sole Traders

The good news is that there are very few formalities that a Sole Trader needs to comply with. There is no annual filing with Companies House or statutory records to complete and Corporation Tax is not separated. This makes it relatively simple to manage the accounts for and can save on administration costs.

How to start as a Sole Trader

It’s very easy to start as a Sole Trader. You need to register for Income Tax as a self employed person with HM Revenue & Customs and if your annual sales are over the VAT registration threshold of £67,000 (2009) you will need to register for VAT. Apart from that you are free to start trading anytime you like.

2. Partnership

Partnerships are very similar to Sole Traders above but consist of two or more people carrying out the business and sharing the ownership and liabilities. The partners still need to register for Income Tax and VAT if they meet the threshold of £67,000 (2009).

3. Limited Liability Partnership

A LLP is similar to that of a Partnership but must be registered at Companies House. It consists of 2 or more people who share the business profits.

Liabilities And Assets

The main benefit over a traditional Partnership is that the Partners are protected in the same way as a Ltd Company having limited personal liabilities. They are legally separate from the business and can protect their own assets from the businesses debts like their houses for instance.

Regulating Limited Liability Partnerships

They must submit an annual return to Companies House. They must also submit their annual accounts. Annual accounts must be submitted to Companies House no later than 9 months of their year end.

The LLP needs to have at least 2 designated members responsible for the business filings. This can be the partners (and is assumed as such) or at least Corporate bodies.

They need to have a registered office in England, Wales or Scotland. This can be a business address or a third parties address.

Limited Liability Partnerships have a business suffix of LLP.

4. Limited Liability Company

The owners (shareholders) and Directors of a Limited Liability Company have protection of their personal wealth. As such a LTD company is the most common type of company formation in the UK.

Liabilities And Assets

The debts and the assets of the company are deemed to be separate from the individuals that own and run the company. It is the company that has the liability for the debts and ownership of the assets. In some extreme cases however, the owners may have to sell their personal assets to pay the debts of the company that have been secured against loans.

Regulating Limited Liability Companies

The Ltd Company must submit an annual return to Companies House. It must also submit it’s annual accounts. Annual accounts must be submitted to Companies House no later than 9 months of the company year end.

A limited Company must have one or more shares.

The company needs to have a registered office in England, Wales or Scotland. This can be a business address or a third parties address.

Limited Liability Companies have a business suffix of LTD.

Incorporating Your Business In The UK:

As discussed above, there are two types of business that need to be properly incorporated with Companies House. That is the LLP and LTD business. The Limited Company can be incorporated online from the Companies House Website.

Limited Liability Partnership

See the Companies House website here for guidance in setting up an LLP. You can also access the PDF version of this guidance here.

Limited Liability Company

To set up as a Limited Liability Company there are four things you need to complete.

1. Articles Of Association

Each shareholder should sign this document. It depicts the internal management affairs and the running of the company. This document can be obtained from any good business stationery shop like Rymans for instance.

2. Memorandum Of Association

This states the company name, the situation of the registered office (England, Wales or Scotland), the liabilities of the company and the objects of the company.

To check to see if the name you want is not already taken you can do that here:

Company Name Search

This form can be bought from a good business or legal stationers.

3. Form 10

This contains details of the situation of the registered office (England, Scotland or Wales) along with details of the directors and consenting secretary

This form can be downloaded from the Companies house website or you can do it here:

Form 10

4. Form 12

Once completed this form needs to presented with the Memorandum & Articles Of Association and be signed by a Solicitor, Justice Of The Peace, Notary Public or Commissioner Of Oaths. You can download this form direct from the Companies House website or you can get it from here:

Form 12

Cost and What To Do

It costs £20 and cheques should be made out to Companies House. It takes around 8 to 10 working days before the company is formed. There is a same day formation service but that costs £50. Once you have completed the four forms above you should post them to either of these regional offices dependant of where your registered office resides. Mark your envelope clearly addressed to New Companies Section:

Wales (Main Office)
Companies House
Crown Way
Maindy
Cardiff
CF14 3UZ

Edinburgh
Companies House
37 Castle Terrace
Edinburgh
EH1 2EB

London
Companies House Executive Agency
21 Bloomsbury Street
London
WC1B 3XD

Before posting your forms make sure you check first to make sure the name is available to be incorporated. You can either use the name search above or you can call this number +44 (0)303 1234 500.

Most of this information and some additional guidance can be found on the Companies House Website

Don’t Forget Your Logo Design

No matter what type of business you set up you should give it a competitive business advantage by looking better than your competitors. A professional logo design from Logo Quality can give you this. Logo Quality specialises in logo design and marketing material design and print for small to medium sized companies. Our service is fast and affordable and all work is guaranteed or your money back.

To give you an idea of our quality you should see some logo design examples in our logo portfolio here:

Logo Design Portfolio

If you would like to discuss your company image and the benefits of a professional logo design please contact one of our business advisors on 01753 20 80 22