One of the first steps in stating a business is opening a company. This article explains what you need to do in 8 simple steps.
This article focuses on how to open a limited company in the United Kingdom. You can find out about other types of companies at the bottom of the article.
Step 1: Choose a company name
You need to stay away from names that are identical or almost identical to another registered company or trademark. Use the Companies House name checker to check name availability and for more detailed information around naming rules see here.
Step 2: Choose a director
A company must have at least one director who is responsible for running the company and making sure company accounts and reports are properly organised. In a private limited company, you can choose to have a company secretary to take on some director’s responsibilities. Note that the company secretary cannot be the company’s auditor.
Step 3: Decide on an official address
This address will be used to receive notices, letters and reminders related to the company. The address must be in the UK, and it must be in the same country your company is registered in.
If you are a remote company with no physical office, you can rent a postal address from accounting firms that forward mail to your home.
Be aware that you registered office address is part of the public registry so if you use your home address, it will be made public.
Step 4: Choose the right industry code (SIC code)
SIC codes describe the industry your company operates in. You can choose one or more from the official list of SIC codes. Common SIC codes used by tech companies are:
62012 - Business and domestic software development
62020 - Information technology consultancy activities
62090 - Other information technology service activities
Step 5: Complete a Memorandum and Articles of Association
When you register your company, your memorandum of association is created automatically. Regarding the Articles of association you can either use the standard model articles from Gov.uk or write your own and upload them when you register your company with Companies House. Your articles will likely be changed later, when investors or new directors join the company, but the model articles are good to start with.
Step 6: Register your company with Companies House
You can easily register your company online with Companies House. You will need 3 pieces of personal information about you and your shareholders (such as town of birth, mother’s maiden name, telephone number, among others) and pay £12 for the registry. When you have successfully registered you will receive:
Certificate of incorporation by email, which confirms that your company legally exists and provides both the company number and the date it was created.
Company’s Government Gateway ID by email.
Step 7: Register with HMRC for Corporation Tax.
If you register your company with Companies house directly online, you will be registered for Corporation Tax automatically. If you set up your company using a third-party (such as Tied or Revolut), you will need to register manually following this link. Once you registered, your Corporation Tax will show up as a section in your Government Getaway account. HMRC will inform you about the deadline for paying Corporation Tax, which you can pay online.
Step 8: Register for eReminder services
You are not automatically registered for this service but you learn how to do so here. This is important because you will be able to file a document directly from the link provided in the reminder, which will avoid late filling penalties by filling your accounts at the right time.
Now that you have set up as a company you probably want to hire staff and expand, so you need to become an employer in the UK. Check out the the 15 essential legal docs startups need to set up employment contracts, option pools and raise investment - and pick a payroll software to pay staff.
Other types of companies in the UK
Private Company Limited by Shares: in companies that are limited by shares, shareholders own a percentage of ownership in the form of shares. This is the most common type of company used for early-stage start-ups.
Private Company Limited by Guarantee: the company is composed of members bound by a guarantee which means that guarantors commit to pay a certain amount of money (guarantee) to the company if it cannot meet its financial obligations.
Sole traders: you run your own business and are self-employed; you are responsible for both the profits and losses that your business makes.
Business partnerships: in a Partnership, two or more partners share responsibilities of the business including paying taxes or their shared profit and loss. Depending on the type of partnership, partners may or may not have personal liability for debts the business cannot pay.