Forming a new company can appear to be a daunting, confusing task. To clear the fog, we asked our friends over at Company Formation MadeSimple for their expert advice:
Choosing a name for your start-up
Your company name is a major part of your brand; it will be the first impression potential customers receive about you and your company, so choose wisely. Do you want to use a location in your name? This can be good for a local business, and online visibility, but less so if you want to expand or relocate in the future.
Think about your competition – who are they and what are they doing? You want to show you are part of the industry, but also need to set yourself apart. You certainly don’t want a name that will allow your brand to be confused with a competitor.
Companies House has a few rules about naming your company, most of which are common sense like not using sensitive or offensive words, and your name must be sufficiently different from an existing company.
Practically, you may also want to consider how easy your company name is to say, spell and remember. Don’t forget to have a look at domain names and social media handles as this may influence your name choice.
Now that you have a name, the next thing to consider is your business structure. This will depend very much on the nature of business you’re forming, so take some time to investigate the pros and cons of each type of structure. You might find that your initial thinking isn’t necessarily the best way forward for you.
Most start-ups don’t begin as a stock exchange listed public limited company (PLC). While a PLC may well be in your future, for now it is most often a four-way decision; You can become a sole trader, form a limited company (Ltd), incorporate a limited liability partnership (LLP) or create a company limited by guarantee (LBG).
Working as a sole trader is an attractive option for many start-ups, especially if you’re not looking to employ people straight away.
You can go out and get started immediately with little red tape and little cost. However, the law makes no distinction between you and your business so any business debt will be collected from your personal wealth – liability is unlimited. As your business grows and your profit increases you will be subject to higher tax brackets and, at that time, you may want to consider a different business structure.
To become a sole trader, you will need to provide your National Insurance number, contact details, nature of the business and the business address.
Unlike a sole trader, under a limited company your business is owned by its shareholders and personal finances are kept separate. You will have to register your limited company at Companies House and it will include more reporting and management responsibilities, along with a little more cost, but you can keep it as simple as you want – you can be the sole shareholder and director.
The tax regime is more favourable when the business begins to grow as limited companies pay corporation tax on profits and company directors are taxed as employees. This could be your phase two or starting point as limited company status does add credibility to the business.
To set up a limited company, you will need to provide a registered office address, Standard Industrial Classification (SIC) Code, director details, shareholder details and Person of Significant Control (PSC) details.
The registered office address is where all statutory mail from Companies House and HMRC will be sent. It will also appear on the Companies House register (meaning the details are available to the public) so, if your business is based at your home, you may want to use an external registered office service for this.
Your SIC Code notifies Companies House of the industry that the company will be operating in. You’ll be presented with a list of available codes when forming your company, and you can select up to four codes.
There must be a minimum of 1 director (minimum age 16 years) and you will need to provide their name, date of birth, nationality, occupation, country of residence and residential address. A company can also act as a director provided there is at least one natural (human) director.
There must be a minimum of 1 shareholder. Shareholders can be the directors too, although this is not a requirement, and shares can be held by other companies. For each shareholder, you will need to be able to provide their full name, residential address, share currency, number of shares and value per share.
Introduced in April 2016 to increase transparency in limited companies, a PSC is ultimately the person controlling the company. You will need to confirm the PSC when you register.
An LLP is a partnership with limited liabilities for its members. It’s most suited to professional services companies and is a hybrid between traditional partnerships and limited companies, limiting the partners’ liability to however much they have invested into the business and offering the flexibility of a partnership.
To set up a limited liability partnership (LLP), you will need to provide a registered office address, SIC code, member details, and PSC details.
There must be a minimum of 2 designated members (minimum age 16 years). You will need to provide name, date of birth, nationality, occupation, country of residence and residential address for each member. A company can also act as a designated member provided there is at least one natural (human) member.
Your final option is a company limited by guarantee. These are mainly used for non-profit organisations such as charities, which retain their profits within the business or use them for some other purpose – they do not distribute to their members.
The main reason for choosing this structure is to protect the people running the company from personal liability for any debts. It’s very similar to a limited company, however instead of shareholders it has members who control it.
To set up an LBG, you will need to provide a registered office address, SIC code, director details, member details and PSC details.
There must be a minimum of 1 director (minimum age 16 years), and 1 member (also known as a guarantor). Members can be directors as well, although this is not a requirement. Other companies can also act as members.
Founded in 2003, we’ve formed over 500,000 companies and helped thousands of business owners start, run and grow their business. We help you form your company online quickly and easily so you’re ready to trade in a matter of hours.
Whether you’re just starting up or looking for support, Company Formation MadeSimple can help you every step of the way. With our range of products and services plus years of experience, our focus is on making business simple – for everyone.
Call us now on 0207 608 5500 or visit www.companiesmadesimple.com for more information.
Moneypenny is the UK’s leading Telephone Answering and Live Chat service provider, offering outsourced solutions for businesses of all sizes. Our range of services are particularly useful for sole traders and smaller businesses who understand the importance of a great first impression and the value of every new enquiry.
To find out how you will benefit from our amazing people and technology, take advantage of our FREE trial. Experience our full service for a whole week with no set up costs, no admin charges and absolutely no ongoing commitment. You have nothing to lose, contact Moneypenny today on 0333 202 1005.
12 Feb 2024
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