Knowledge

Introduction to shares

Companies limited by shares are often divided into portions of ownership. Each portion is called a ‘share’. A company with only one share has not been divided into different parts – that one share represents 100% of the business, and the shareholder who owns that share owns all of the business. However, if a company has more than one share, ownership of the business has been divided into equal portions, with each portion representing a percentage of the business. One or more shareholders will buy these shares, thus owning some or all of the company.

What is the purpose of shares?

When you set up a limited company or limited liability partnership, you will be required by law to keep (where applicable) the following statutory records and make them available for public inspection at your registered office or SAIL address:

Shares dictate the amount of control held by each shareholder – the more shares you have, the more control you have.
Shares represent the decision-making power of each shareholder – most shares carry the right to cast one vote on important decisions that need to be made. Therefore, the more shares you have, the more votes you may cast at general meetings.
Shares determine the percentage of business profits a shareholder is entitled to receive.
If a shareholder owns all issued shares, he or she may receive 100% of all surplus income (after tax, bills, etc.) generated by the business each year. Alternatively, this money can be re-invested in the business.
If a company has more than one shareholder and share, then each shareholder will be entitled to receive a percentage of the profits in relation to the percentage of ownership represented by the number of shares.
Shares dictate the limited liability of each shareholder.
If one shareholder owns all issued shares (one or more), he or she is legally required to contribute the nominal value of each share (normally £1) to cover debts if the business is unable to pay its bills.
If a company issues lots of shares to lots of different shareholders, each shareholder has to contribute the nominal value of each of their shares.
Companies limited by guarantee do not have shares. Ownership is determined by the amount of time and money each guarantor contributes to the company, and the amount of money they guarantee to pay if the company becomes insolvent or is wound up. This is all agreed between guarantors.

What is share capital?

Share capital is the collective nominal value of all shares issued by a limited company. It determines the value of a company and the total limited liability of the company’s shareholders. For example:

If a company issues only 1 share with a nominal value of £1, the share capital of the company is £1.
If a company issues two shares with a nominal value of £1 each, the share capital of the company is £2.
If a company issued 100 shares with a nominal value of £1 each, the share capital of the company is £100.

There is no limit to the number and value of shares a company can issue, unless the articles of association includes an optional provision of authorised share capital.

What is authorised share capital?

Authorised share capital is a restriction that can be included in the articles of association to limit a company’s total issued share capital to a fixed sum. This was a mandatory provision under the Companies Act 1985, but it was abolished under the Companies Act 2006 when the payment of Stamp Duty on issued share capital became redundant.

Private companies limited by shares must now add this provision to their articles if they wish to restrict the number and value of shares that can be issued during and after company formation.

Any company that was registered prior to the abolition date – 1st October 2009 – will be subject to the restriction unless the shareholders pass a resolution to remove the provision or increase the authorised sum. Alternatively, it may be easier to simply adopt the latest Model articles in their entirety if a company wishes to completely remove the provision of authorised share capital.

Different types of shares

Limited company shares come in a variety of classes, or ‘types’. Most companies, however, only issue ‘ordinary’ shares. This class of share normally has a nominal value of £1 and provides equal rights to each shareholder. These rights typically include (per share): the right to cast one vote at general meetings; the right to equal dividend payments; and the right to equal capital if the company is wound up/dissolved.

There are lots of other classes of shares that companies may issue, including:

ABC or Alphabet shares

Ordinary shares divided into different categories. Each category provides different voting rights, different rates of dividend payments and various other rights to each class of shareholder. It is simply a way to vary the different rights of ordinary shares to different shareholders.

Deferred ordinary shares

A type of share that usually only pays dividends to shareholders when minimum dividends have been paid on all other share classes. Deferred shares typically offer the right to vote at general meetings, and the right to receive a share of surplus capital upon the winding up of the company.

Management shares

Provides additional voting rights to shareholders. Most commonly issued to the founding members of a company to enable them to maintain more control than other shareholders who join the company after incorporation. Management shares usually carry multiple votes – whereas other share classes typically carry just one vote per share.

Non-voting shares

This class of share can be issued without voting rights, thus providing the right to receive dividend payments from company profits but no right to cast a vote at general meetings. Companies will often issue this type of share to employees or family members of the main shareholders.

Preference shares

Provides shareholders with a preferential right to a fixed percentage dividend payment; i.e. their profit entitlement is prioritised ahead of shareholders of other share classes. This type of share is typically non-voting; therefore, the shareholders have no right to cast votes at general meetings. Preference shares are sometimes redeemable, too.

Redeemable shares

A type of share that is issued on the condition that the company can buy back the shares at a future date, either at a fixed date or on a conditional basis. This type of share is often issued to employees, thus allowing a company to redeem the issued shares if and when an employee leaves.

Share classes are not restricted to these shares alone. A company may create any type of share it wishes. The aforementioned types of shares are simply the most common and popular classes used by private limited companies in the UK.
Prescribed particulars of rights attached to shares

All share classes must have prescribed particulars. These are simply the various rights attached to each class of share – voting rights, dividend rights, capital rights, and redeemable rights – all of which must be outlined in the statement of capital during the incorporation process.

Prescribed particulars may also be outlined in a company’s articles of association. They are defined in the Companies (Shares and Share Capital) Order 2009 as:

Particulars of any voting rights attached to the shares, including rights that arise only in certain circumstances;
Particulars of any rights attached to the share, as respects dividends, to participate in a distribution (of profits);
Particulars of any rights attached to the shares, as respects capital, to participate in a distribution (including on winding up; and,
Whether the shares are to be redeemed, or are liable to be redeemed, at the option of the company or the shareholder.

When completing the prescribed particulars section of the statement of capital, Companies House suggests following these rules:

Show details of the prescribed particulars for every issued class of share.
Provide information that is meaningful. Do not simply refer the reader to another document or the legislation for the share rights information.
Show details of voting, dividend and distribution rights on winding up, but there is no need to refer to capital distribution or redemption if they do not apply.

Example of acceptable wording:

“Ordinary shares have full rights in the company with respect to voting, dividends and distributions.”

Examples of unacceptable wording:

“please see/refer to the articles of association for the rights”
“rights as set out in the articles”
“as in the Companies Act 2006”
“not applicable”
“pari passu”

What is the nominal value of a share?

Shares represent the limited liability of a company and its shareholders; therefore, all shares must have a nominal value that is paid up at the time of their issue, or at a later date upon the request of the company if the business is unable to settle its liabilities.

The nominal value (par value) of a share is the absolute minimum sum that a share may be sold/purchased for. This means that a company cannot simply sell its shares for less than their nominal value or give them away for free, unless the nominal value of the shares is ‘paid up’ by the company beforehand. Only then may the company issue free shares to family members of existing shareholders, for example, or to employees as part of an incentive scheme.

The nominal value is not the same as the actual value (market value) of a share which, in many cases, may be much higher – the difference between the nominal value of a share and the price paid for a share is known as the ‘premium’.

Most companies issue shares with a nominal value of £1, but you may issue shares with any nominal value from 0.01p.
How many shares to issue

You can issue any number of shares when you are setting up a company, provided you issue at least one. For small companies registered with just one shareholder, it is common to issue just one share. However, you must consider your future plans. For example, if you wish to sell shares to other investors at some point in the future, perhaps to raise capital to expand your business, you should consider issuing more than one share during the company registration process. This will make it easier to sell shares as and when required.

An even number of shares is an ideal choice for many companies – quantities such as two, 10, and 100, for example. This makes it easy to work out what percentage of the company is owned by each shareholder.

If you issue a greater number of shares, you can sell smaller portions of your business to lots of shareholders and keep most of the shares for yourself, thus retaining majority control of the business. If you issue just two shares, for example, each of which represents 50% of the company, you will be selling half of your business to someone else.

Ideally, you should issue one, 10 or 100 shares. If you issue 10 or 100, you should keep at least 6 or 51 shares for yourself, respectively. This will enable you to retain majority ownership and control.

Be wary of issuing too many shares, as this will increase the limited liability of the shareholders if the company runs into financial difficulty or is wound up.
Issuing and transferring (selling) shares after company formation

Issuing more shares

Regardless of the number of shares you issue during the incorporation process, you may issue more shares at a later date, if need be. This procedure requires increasing your company’s share capital and creating new shares in addition to the ones you have already issued. This will only be necessary if you wish to sell more shares than your company has issued.

You must refer to the articles of association before issuing more shares. If the articles contain any restrictions; like authorised share capital, pre-emption rights or the directors’ power to allot (issue) shares, you will have to take these into consideration before taking any action.

Authorised share capital – As previously discussed, if you include authorised share capital in your company’s articles, you will not be allowed to issue more shares than the total authorised share sum, unless the shareholders pass a special resolution to remove or increase the restriction.
Pre-emption rights – This is another optional provision that can be included in the articles. The sole purpose of this provision is to protect the rights of existing shareholders. If new shares are created, existing shares are diluted in overall value in relation to the percentage of the business they represent; therefore, pre-emption rights give existing shareholders the right to purchase any available shares before outside investors. If pre-emption rights are included in the articles, new shares must be offered to existing shareholders relative to the percentage of their current shareholdings.
Directors’ powers – Model articles permit directors to authorise the allotment of new shares; however, it is possible for shareholders to amend the articles to restrict directors’ powers. In such circumstances, any new share issue will require approval from the shareholders.

To issue more shares, a Return of Allotment of Shares (Form SH01) must be delivered to Companies House within 15 days of the allotment. To complete this form, you must provide the following information:

Company name and registration number
Allotment date
Details of new shares
Updated statement of capital
Prescribed particulars
Signature of a director

This form can be downloaded and delivered to Companies House online using our free Client Admin Portal. Shareholders’ details should be updated on the statutory register of members and delivered to Companies House on the next confirmation statement.
Transferring shares

If you wish to sell shares to raise capital, but do not require creating more shares, you can simply transfer some of your company’s existing shares to other shareholders or outside investors. However, you must still refer to the articles for restrictions such as pre-emption rights or the director’s power to authorise the transfer of shares.

This process is much easier than allotting new shares. Simply complete a Stock Transfer Form (J30 Form) with the following information:

Company name and registration number
Details of transferred shares
Amount paid (or due to be paid) on transferred shares
Non-cash payment details – if shares are transferred as a gift, for example, or as part of an employee share scheme
Name and address of current shareholder
Name and address of new shareholder
Declaration of Stamp Duty (if applicable)

Stamp Duty is only payable to HMRC if the sale of shares exceeds £1,000. In such instances, the Stock Transfer form must be stamped by HMRC, and the new shareholder will be required to pay 0.5% of the sale value to HMRC.

There is no need to send the Stock Transfer form to Companies House, but you will require updating shareholders’ details on the next confirmation statement.
Administrative requirements upon the allotment or transfer of shares

New shareholders must receive a share certificate.
The company must keep copies of all share certificates.
Upon the transfer of shares, both the old and new shareholder should receive a copy of the Stock Transfer form.
The company must keep a copy of all Stock Transfer forms with its statutory records.
The company must keep a copy of all Returns of Allotment of Shares with its statutory records.
Any cash payments for shares must be paid into the company’s bank account.
Shareholders’ details should be updated in the company’s statutory register of members.
Companies House will update shareholders’ details on the public register when the next confirmation statement is filed. You can either wait until the confirmation statement deadline, or you can file a confirmation statement immediately, if you would like the information updated immediately.

Share certificates

A share certificate is a document that verifies the ownership of shares. Each certificate should contain the following information:

Company name and registration number
Share certificate number
Date of share issue or transfer
Name and address of shareholder
Number, class and nominal value of shares
Directors’ signature
Registered office address of company

Every shareholder should receive a share certificate when new shares are purchased. The company must keep copies of all issued certificates.

Paying for company shares

Shareholders usually pay for their shares immediately, because shares are normally sold as a means of raising capital. However, if a company permits, shares may remain unpaid until a request is made by the company. A call to pay for shares usually occurs if a company becomes insolvent (unable to pay its bills) or is wound up (dissolved).

Most shares are paid for in cash, but there are other forms of payment that companies may accept (at their discretion), including:

Goods
Services
Property
Knowledge
Expertise
Shares in other companies
Writing off debt
Gift or bonus (no payment required)
Goodwill gesture
Employee incentive or remuneration

Cash payments must be paid into a company’s business bank account and recorded in the financial accounts. The public register will state whether a company’s shares are paid or unpaid at the time of its most recent confirmation statement. For information about the statement of capital and confirmation statement, please refer to our Reporting Requirements section.

A guide to the foundation documents of a company

The memorandum and articles of association are two separate documents that all limited companies are legally required to have when they are incorporated with Companies House. Limited liability partnerships do not need these documents.

The memorandum of association is a signed declaration of the founding members’ (shareholders or guarantors) intention to legally incorporate and become part of a company by taking shares or committing to a financial guarantee.

The articles of association is a more substantial document that outlines the constitution and governance of the company. It contains a number of sections and provisions, each of which sets out the rules and regulations of a company, the responsibilities and rights of its officers and members, and the relationship between the company and its members.

Memorandum of association

This is a very simple document in a standard format that cannot be altered. It is a legal declaration of the first shareholders of a company limited by shares or the guarantors of a company limited by guarantee, in which they state their wish to set up a company and become part of it. It serves as a record of their company membership and their financial liability toward the business.

Each member is required to subscribe (add) their name to the document and take at least one share or agree to a guarantee during the company formation process. Members must contribute the value of their shares or guarantees if the business becomes insolvent or is dissolved. This is known as ‘limited liability’.

The following details will be displayed on the memorandum of association and disclosed on the public register of companies:

Registered company name
Date of subscription
Act under which the company is incorporated – Companies Act 2006
Whether the company is limited by shares or limited by guarantee
Names of each subscriber (founding members)

Companies House will make all of this information available on public record as soon as your company is incorporated, and the memorandum will remain there indefinitely in its original form. You will not be able to change any details on the memorandum after incorporation, even if you make a spelling mistake or one of the founding members leaves the company at a later stage.
Articles of association

The articles of association is essentially a rule book for running a company. All members and company officers (directors and secretaries) are required to comply with the provisions of the articles at all times, but it is possible to make alterations after incorporation if the needs of the business or its members change.

We provides standard articles (very similar to Companies House ‘Model’ articles) prescribed by the Companies Act 2006 for companies limited by shares and companies limited by guarantee. These articles are sufficient and appropriate for the majority of new companies.

If the standard articles do not suffice, you can download the model articles and alter them accordingly. Alternatively, you may create entirely bespoke articles on the condition they comply with company law – if you wish to issue different types of shares, for example, or restrict the powers of the company directors, you will have to alter the Model articles accordingly and upload a copy for Companies House with your incorporation application.
Contents of Model articles for companies limited by shares:
Part 1: Interpretation and limitation of members’ liability
Part 2: Directors

Responsibilities and powers of directors
Directors’ powers and responsibilities
Decision-making by directors
Appointment of directors

Part 3: Shares and distributions

Share guidance – issuing, payment, powers, transfer procedure
Issuing dividends
Issuing dividends and other distributions
Capitalisation of profits

Part 4: Directors

Organisation of general meetings
Voting at general meetings

Part 5: Administrative arrangements

Means of communication to be used
Company seals
Inspection of accounts and other records
Provision for employees on cessation of business
Directors’ indemnity and insurance

Entrenched or restricted articles

It is possible to include additional clauses in the articles to restrict the alteration or removal of certain provisions after incorporation. This can be useful for companies that are owned by more than one person, particularly when minority shareholders (those holding 25% voting rights or less) are involved. Companies with just one member, or two members with 50% equal shareholdings, do not normally add such clauses, because there is no need.

Most changes to the articles can be approved by passing a special resolution, which requires a 75% majority vote of the members. If you wish to further restrict changes to certain provisions beyond this percentage – for example, the unanimous agreement (100%) of all members – you will have to include provision for entrenchment in the articles.

Under the Companies Act 2006 (Sec. 22), the rules for entrenched provisions are set out as follows:

A company’s articles may contain provision (“provision for entrenchment”) to the effect that specified provisions of the articles may be amended or repealed only if conditions are met, or procedures are complied with, that are more restrictive than those applicable in the case of a special resolution.
Provision for entrenchment may only be made in the company’s articles on formation, or by an amendment of the company’s articles agreed to by all the members of the company.
Provision for entrenchment does not prevent amendment of the company’s articles by agreement of all the members of the company, or by order of a court or other authority having power to alter the company’s articles.
Nothing in this section affects any power of a court or other authority to alter a company’s articles. (http://www.legislation.gov.uk/ukpga/2006/46/section/22)

Under the Companies Act 2006, it is no longer possible to introduce absolute entrenchment of the articles. You can only restrict provisions on a conditional basis by enabling them to be changed by following a specific procedure, or upon the satisfaction of specific conditions like a 100% majority vote of the members.

As per the Companies Act 1985, a limited company was able to entrench certain aspects of its constitution by stating them in the memorandum with the condition that they could not be changed at any time. Any existing company that was incorporated under the Companies Act 1985 (before 1st October 2009) that wishes to change absolute entrenchment in its articles will need to obtain a court order to do so.
Notification procedures for entrenched articles

You must inform Companies House using the appropriate form if you include or wish to make alterations to any entrenched provisions in your company’s articles. The following notification provisions can be found in sections 23 and 24 of the Companies Act 2006. Their purpose is to ensure Companies House, and any member of the public who searches the public register of companies, is on notice that a company’s articles contain entrenching provisions, and that special rules apply to the company’s articles.
How to adopt entrenched provisions

To adopt or alter the articles to include entrenched provisions, you must notify Companies House on the prescribed form. This must be done within 15 days of any such amendment taking effect. You must include a copy of the articles as amended, in addition to a copy of the members’ resolution approving the amendment.

Changes upon incorporation: Companies House Form IN01
Amending the articles after incorporation: Form CC01

How to remove entrenched provisions

To remove entrenched provisions from the articles of an existing company, you must notify Companies House on Form CC02. This must be done within 15 days of the amendment. You must also include a Statement of Compliance (Form CC03) and copies of the altered articles and the members’ resolution approving the changes.
How to alter existing articles containing entrenched provisions

To alter existing articles that contain entrenched provisions, you must provide a document for Companies House that shows evidence of the alteration(s). You must also include a Statement of Compliance certifying the changes have been made in accordance with the articles (including any provision for entrenchment) or, where relevant, in accordance with any order of the court or other authority that is in force at the time of the amendment.

You may not alter the articles in any way that requires shareholders to increase their shareholdings or liability, unless a written agreement is made before or after the alteration.
Can I change the articles of association after company formation?

If you wish to alter the articles of association after company registration, the shareholders must pass a special resolution at a general meeting or in writing. To pass this type of resolution, at least 75% of the votes cast must be in favour of the decision.

When the changes have been made and agreed by the members, the director or company secretary should file a copy of the articles as altered, and a copy of the members’ resolution with Companies House.

A copy of the new articles and the members’ resolution should be kept with your company’s statutory records at the registered office or SAIL address.
Filing notification of changes to the articles

If you need to make any changes to your articles of association after your company has been registered, you can file the required documentation (the articles as altered and the accompanying members’ resolution) online using our secure software filing facility.

Company address overview

To complete the company formation process, you will have to provide a variety of addresses on the application form for

Companies House:

Registered office address – limited companies and limited liability partnerships
Service address – company directors, company secretaries, PSC, LLP members, shareholders and guarantors
Usual residential address – company directors, PSC and LLP members

This information will be placed on public record; however, residential addresses will remain on a private Companies House register unless a residential address is used as a registered office, a service address or a contact address. It is therefore important to give careful thought and consideration to the address details you provide for Companies House.

There are three optional company addresses you may wish to use after incorporation. These include:

Single Alternative Inspection Location (SAIL address)
Business addresses
Trading addresses

Registered office address

This is the most important company address you will have to think about. It will be the official home address, or headquarters, of your limited company or limited liability partnership.

Requirements, restrictions and options

Must be situated in the jurisdiction in which you set up your company/LLP – England and Wales, Scotland or Northern Ireland. If you register a company or LLP in England and Wales, your registered office can be in either country; however, if you register a Welsh company or LLP, your registered office must always remain in Wales.
You cannot change the jurisdiction of your registered office at any time, but you can easily move your registered office to a different address if it remains in the same part of the UK. However, companies and LLPs registered in England and Wales can change the location of their registered office address between these two countries.
Address details will be made available to the public on the Companies House’ official register of companies.
Must be a physical address, and you must provide the full mailing address including the postcode.
You may use a PO Box address if you include the postcode, but you cannot use a PO Box number, a DX number or a Legal Post (LP) number.
You may use a private residential address as a registered office, or you can use a professional commercial address to protect the privacy of your home. Remember: your registered office details will appear on public record.
The Principal purpose of a registered office address is to receive statutory and legal company mail from Companies House, HMRC and Government Gateway. The type of mail you can expect to receive includes: business tax information and notices; reminders to file confirmation statement and annual accounts; notices to deliver Company Tax Returns and VAT returns; notification of late-filing penalties; legal notices; requests to inspect statutory records; and information about PAYE and Employers’ National Insurance Contributions.
It is the official inspection location of statutory company/LLP registers and records.
You can only have one registered office address at any given time.
You do not have to work or trade from your registered office address.

We provides a professional Registered Office Service in London for only £117.00 per year, which is suitable for all private limited companies and LLPs incorporated in England and Wales. This address service can be purchased at the same time as setting up a company or LLP through Ours, or it can be purchased for an existing company or LLP at any time after incorporation.
Service address

This type of address is required by all company directors, secretaries, PSC and LLP members. It is an official contact address used by Companies House and HMRC to deliver statutory and legal mail for the attention of an individual director, secretary or LLP member. It is not the same as a registered office address.

Requirements, restrictions and options

Can be situated anywhere in the UK or overseas, regardless of where the company or LLP is registered.
Address details will be made available to the public on the Companies House’ official register of companies.
Must be a physical address, and you must provide the full mailing address including the postcode.
You may use a PO Box address if you include the postcode, but you cannot use a PO Box number, a DX number or a Legal Post (LP) number
You may use a private residential address as a service address, or you can use a professional commercial address to protect the privacy of your home. Remember: your service address details will appear on public record.
Your service address can be the same as your registered office address.
Principal purpose of a service address is to receive statutory and legal mail from Companies House and HMRC relating to your role as a company director, company secretary, PSC or LLP member. The type of mail you can expect to receive includes: information about registering for Self-Assessment; paying Income Tax and National Insurance Contributions; filing Self-Assessment tax returns; P60s; penalty notices for late filing; and legal notices relating to your role.
A service address can be easily changed at any time after incorporation.
You can only have one service address at any given time.
You do not have to work from your service address.
Many company secretaries simply state ‘The Company’s Registered Office’ as their service address. In such instances, their service address details must be recorded as such in the proposed company’s register of secretaries.

We provides a professional Service Address in London for only £78.00 per year, which is ideal for limited company officers who wish to protect the privacy of their home and boost their corporate image. You can purchase this service address at the same time as registering a company through Ours, or you can buy the service for an existing company at any time after incorporation.

Usual residential address

Company directors and LLP members must provide their usual residential address details on the company/LLP formation application.

Requirements, restrictions and options

The details of your home address will not appear on public record unless you use it as your service address or registered office address. If you do not use your home address as your registered office or service address, Companies House will simply record your residential details on an internal private register. This information will only be disclosed to select government and credit reference agencies.
You may apply for exemption from having your home address disclosed to credit reference agencies under section 243 of the Companies Act 2006.
If you use your home address as your service address and it has been recorded as such in the company’s proposed register of directors’ residential addresses, simply indicate this on the application or state ‘Same as Service Address’. However, you cannot do this if your service address is the same as the registered office. You will have to supply your residential address in such instances.

Single Alternative Inspection Location (SAIL address)

This address is not required during the incorporation process. You will only have to provide these details if you choose to make your company’s or LLP’s statutory records and registers available for public inspection at any location other than the registered office address. A SAIL address tends to be used when a company or LLP has a residential registered office and the home owner does not wish to allow members of the public into his or her home to inspect statutory records; or, the location of a registered office is not geographically convenient for the director(s), company secretary or designated LLP members to visit to allow for the public inspection of statutory records.

Requirements, restrictions and options

A SAIL address must be situated in the same part of the UK as a company’s or LLP’s registered office address – England and Wales, Wales (for Welsh companies), Scotland or Northern Ireland.
You may use a residential address or a professional commercial address.
You must inform Companies House if you start using a SAIL address.
You must provide Companies House with a list of the statutory records and registers held at the SAIL address.
You may keep some or all of your statutory records and registers at a SAIL address.
Only one SAIL address is permitted at any given time.
A SAIL address can be changed at any time but it must stay in the same jurisdiction, and you must tell Companies House immediately
SAIL address details are disclosed on the public register of companies.
Members of the public must be allowed access to inspect your statutory records and registers if a request is made – most inspection requests are made by HMRC.

Business address

A business address is not legally required at any time, but it can provide many benefits. Unlike other types of company addresses, you can have any number of business addresses at any one time. This type of address tends to be used as a general contact address for unofficial (non-statutory) business correspondence. You would use a business address for communicating with third parties such as: employees; clients and customers; banks and lenders; accountants; service providers; suppliers and manufacturers; couriers; marketing agencies and anyone else with whom you do business.

A business address is often the trading location of a company or LLP – the place where its main business activities take place, which may or may not be the same as its registered office. If your business activities are carried out in a number of locations throughout the UK and/or abroad, you may wish to have a business address in each of these locations to establish a presence and provide a geographically localised contact address for people to get in touch – shop, office, branch, factory, warehouse, etc.

This is a really effective way to create awareness of, and promote, your products or services beyond the scope of your country of incorporation and registered office location. All incorporated businesses are restricted to being officially registered in one country, but they are not limited to establishing a presence or trading in only one location.

Trading address

A trading address is the place where your company or LLP conducts its main business activities, which may or may not be the same as your registered office address and/or business address. Every business has a trading location – even if you work from home selling products online, you still have a trading location: your home. However, there is no need to provide this information to anyone, including Companies House and HMRC, but many businesses do provide their trading address details to customers and clients as a means of contact.

Changing address details after incorporation

You must notify Companies House as soon as possible if you change your registered office address, service address, SAIL address or usual residential address after incorporation. This is an incredibly simple procedure that can be completed online in a few minutes. You can inform Companies House via WebFiling, or through Ours’ free client admin portal.

For detailed guidance on changing your company/LLP details after incorporation, please visit our Reporting Requirements section.

What does company formation mean?

Company formation is the process of legally incorporating and registering a limited company with Companies House. This can be done in as little as 3 to 6 working hours (subject to Companies House workload) by completing and filing an online application form. Upon incorporation under the Companies Act 2006, a limited company becomes an individual legal entity that is completely distinct from its owners and responsible for its own finances and liabilities. A limited company can therefore enter into contracts in its own name, take ownership of its assets, and provide financial protection to its owners in the form of limited liability.

About Companies House

Companies House is the registrar of companies in the United Kingdom, and it operates in three jurisdictions: England and Wales, Scotland, and Northern Ireland. It is an executive government agency of the Department for Business, Innovation and Skills (BIS), and its primary functions are:

To incorporate and dissolve limited companies.
To examine and store all mandatory corporate information provided by limited companies that are registered in the United Kingdom.
To provide transparency and openness by making all corporate information available to the public on the official government register of UK companies.

What is limited liability?

Limited liability is one of the most significant benefits of company formation. It provides financial protection to company shareholders, company guarantors and LLP members. Because the law views limited companies as distinct legal entities, their owners are only responsible for business debts up to the amount of money they invest in the company through shares, or agree to pay in the form of a guarantee. Any liabilities beyond these sums are the responsibility of the limited company alone. Without such a safety net, company owners risk losing their personal assets and finances as a result of business debts and claims.

How to register a limited company

The incorporation process is surprisingly quick, straightforward and affordable. There are three ways in which a company can be registered: online or by post directly with Companies House, or online through a professional company registration agent like We. The latter option is by far the most popular because of its quickness, simplicity, low cost, and efficacy. Additionally, expert advice and assistance is on-hand throughout the entire process.

To register a new company through an authorised agent, an online application form must be completed.

Registering a private company limited by shares or guarantee

The following information is required to register a private company limited by shares or guarantee:

PROPOSED COMPANY NAME.
Your chosen name must not be the ‘same as’ or ‘too like’ the name of an existing company on the register, unless your company will be part of the same group, or permission is granted by the other company. You can use our online name-check facility to compare your chosen name against the official Companies House register – simply click on the green ‘Start’ button on our homepage.

REGISTERED OFFICE ADDRESS.
This must be situated in the UK jurisdiction of incorporation – England and Wales, Scotland, or Northern Ireland. Your registered office will be your company’s official home address, where statutory mail will be delivered from Companies House and HMRC. However, there is no need to trade from this address.

DIRECTORS’ DETAILS.
You must appoint at least one director, but you may appoint as many as you like, provided they are at least 16 years old. Other companies and non-human entities may also be appointed as directors, as long as one other director of the company is an individual person. Shareholders and guarantors can be directors, too. The following details are required for each director:
Title
Full forename(s)
Surname
Former name(s)
Country/State of residence
Nationality
Date of birth
Residential address
Service address
Business occupation

SUBSCRIBERS’ DETAILS (shareholders or guarantors)
You must appoint at least one shareholder/guarantor, but you may have as many as you like. Other companies and non-human entities may also be shareholders or guarantors. Directors can be shareholders or guarantors, too. The following details are required for each subscriber:
Forename(s)
Surname
Service address
Three personal details to create a secure online signature

PERSON WITH SIGNIFICANT CONTROL (PSC) information
You must appoint at least one shareholder/guarantor, but you may have as many as you like. Other companies and non-human entities may also be shareholders or guarantors. Directors can be shareholders or guarantors, too. The following details are required for each subscriber:
Full Name
Date of Birth
Residential Address
Service address
Nationality
Nature of Control (e.g. Holds more than 50% to 75% of shares.)
Three personal details to create a secure online signature

MEMORANDUM AND ARTICLES OF ASSOCIATION.
These are two separate documents that state the name of each member, their agreement to form a limited company and take shares or provide a guarantee, and the rules and regulations for running the business. Most companies adopt model articles from Companies House, but it is possible to adapt this standard version or create entirely bespoke articles.

STATEMENT OF CAPITAL AND INITIAL SHAREHOLDINGS (limited by shares companies only).
This section requires information about the shares you wish to issue – quantity, type, value, attached rights, and whether or not they are paid or unpaid by each shareholder.
STATEMENT OF GUARANTEE (limited by guarantee companies only)
This section outlines the amount of each guarantor’s financial guarantee.

Registering a limited liability partnership (LLP)

The following information is required to incorporate an LLP:

PROPOSED LLP NAME.
Your chosen name must not be the ‘same as’ or ‘too like’ the name of an existing company or LLP on the register – you can use the online name-check facility on our homepage to compare your chosen name against the official Companies House register.

REGISTERED OFFICE ADDRESS.
This must be situated in the UK jurisdiction of incorporation – England and Wales, Scotland, or Northern Ireland. This will be your LLP’s official home address, where statutory mail will be delivered from Companies House and HMRC, but there is no need to trade from this address.

LLP MEMBERS’ DETAILS
You must have two or more members (partners) to set up a LLP, but you may appoint as many as you like, provided they are at least 16 years old. Other companies, LLPs and non-human entities may also be appointed as LLP members, as long as one other member is an individual person. The following details are required for each member:
Title
Full forename(s)
Surname
Country/State of residence
Date of birth
Residential address
Service address
Three personal details to create a secure online signature

PERSON WITH SIGNIFICANT CONTROL (PSC) information
Full Name
Date of Birth
Residential Address
Service Address
Nationality
Nature of Control (e.g. Holds more than 50% to 75% of shares.)
Three personal details to create a secure online signature

Uploading amended articles and additional documentation

The ability to upload and file documents electronically is one of the many advantages of registering and managing your company online through Filing Software.

If you decide to adopt model articles in their entirety, you will simply be required to check the appropriate box on the online application to notify Companies House. There is no need to attach these articles because you are not altering the statutory version.

If you choose not to adopt model articles in their entirety, you will be required to download the model articles, make the necessary alterations, upload the document as altered and attach it to your online application. Similarly, entirely bespoke articles will have to be uploaded and attached to your application.

Companies House will display your articles on the public register of companies along with the rest of your company’s details.

You will also be required to upload supporting documentation if your proposed company name contains any ‘sensitive’ words and expressions – visit our company name guidance section for detailed information.

Submitting your company formation application

When you are ready to send your online application to Companies House, check it carefully to ensure you have included all the relevant information, entered the details accurately, indicated the articles you wish to use, and uploaded any required additional documentation. When you are satisfied with your application, simply click ‘SUBMIT’.

Your registration form will be thoroughly examined by one of our specialist agents, before being electronically submitted to Companies House through a secure filing system. Applications are then checked by Companies House and, all being well, approved within 3 working hours. You will be issued with digital copies of your incorporation documents as soon as this happens, and you can start trading whenever you like.

All of the information provided on the application form will be placed on the official register of companies. This is available to all members of the general public. Residential address details will remain on a private register at Companies House, unless such an address is used as a registered office or service address.

When your company has been successfully incorporated, your next step will be to register with HMRC for the appropriate business and/or personal taxes. Visit our HMRC guidance section for detailed information.

What incorporation documents do I receive?
Certificate of Incorporation

Companies House issues a certificate of incorporation to all limited companies and LLPs to prove their legal existence and incorporation under the Companies Act 2006. We will provide you with a digital version of this certificate by email immediately upon company formation. Some of our formation packages also include a paper certificate which will be posted to your registered office.

The certificate of incorporation will include the following details:

Full company/LLP name
Date of incorporation
Company registration number (CRN)
Country of incorporation
Type of company
Location of registered office
Incorporating legislation
Issuing registrar
Companies House seal

Memorandum and articles of association

If you register a limited company, you will also receive a digital copy of the memorandum and articles of association. You must keep digital or printed copies of these documents at your registered office or SAIL address for inspection purposes. You will also be required to refer to the articles on a number of occasions to ensure your company adheres to company law.

Share certificates

Digital share certificates will be issued to companies limited by shares. Again, you may receive paper copies of these documents, depending on your chosen company formation package. Each shareholder must be given a copy of his or her signed share certificate as evidence of their shareholdings in the company. Copies should also be kept at the registered office or SAIL address with your company’s statutory records.

Each share certificate will contain the following details:

Certificate number
Date of issue
Full company name
Company registration number
Shareholder’s name and contact address
Details of issued shares – quantity, class, and nominal value of the share

You must ensure the safekeeping of these incorporation documents, as they contain important information that you will need to refer to on a regular basis. You will be expected to provide copies of these documents to banks, lenders and investors in a number of situations.

LLP Agreement

If you register an LLP, you will receive a draft LLP Agreement that can be completed and returned to us by email. We strongly recommend the use of such a document to outline and clarify the rights and responsibilities of the partners. This will minimise the potential for confusion or disagreements during the course of business. You can easily change the particulars of the agreement at any time after incorporation, if need be.

Company Register with first entries

Your statutory company register with first entries (as per the date of incorporation) will include the following documents, where applicable:

Register of applications and share allotments
Register of members and share ledger
Register of LLP members
Register of transfers
Register of mortgages and charges
Register of debentures
Register of dealings or executions
Register of directors
Share certificate(s)
Register of PSC

You will be required to update the statutory register throughout the life of your company when certain details change. It is important that these records are kept up-to-date at your registered office or SAIL address for inspection purposes.

Rejected applications

Every now and then, a company formation application will be rejected by Companies House. This is usually the result of missing or inaccurate information. In the unlikely event that this happens, Companies House will inform you immediately and you will have the opportunity to address the error. You can then simply re-submit your amended application online on the very same day for no additional cost.

Limited companies

There are two types of meetings that can be held by private limited companies: a board meeting of the directors and a general meeting of the members (shareholders or guarantors). There is no statutory requirement in the Companies Act 2006 to hold either type of meeting, with the exception of the First Board Meeting of the Directors; however, the need to hold one or both types of meetings will arise on a number of occasions, when decisions have to be made.

If a board meeting or general meeting does take place, there are a number of statutory requirements to which a company must adhere. Minutes must be taken to record the proceedings of the meetings and note the names of those in attendance. During both types of meetings, it is common for resolutions to be passed. A resolution is simply a majority or unanimous decision taken by the directors or members on a particular matter pertaining to the business. Any resolutions that are passed must be recorded and stored at the company’s registered office or SAIL address. In many cases, copies of these resolutions will also have to be filed with Companies House.

Limited Liability Partnerships

There are no provisions in the Limited Liability Partnerships Act 2000 or the Limited Liability Regulations 2001 requiring LLPs to hold any official type of meeting of their members – the reason being that LLP legislation is intended to provide freedom and flexibility to LLP members with regard their internal affairs and management.

As such, LLP members should draft their own regulations in a Partnership Agreement to outline the required procedures for decision-making. Most LLPs will specify that ordinary matters may be decided by a majority of members, and that all members must consent to any significant changes to the nature of the business. However, it is entirely up to the members of an LLP to arrange such particulars between themselves when the business is formed.
Board meetings

Company directors collectively form a board. A board meeting is, therefore, any official meeting of the directors of a limited company. There is no legal requirement to hold any board meetings in a private limited company, but it is common practice to hold such meetings at regular intervals if a company has more than one director. Furthermore, it is beneficial to hold a meeting of the directors within one month of company formation. This enables the directors to clarify the objectives of the new business and determine their individual duties and responsibilities.
Board meeting agenda

Directors will usually convene at a board meeting to discuss business matters that need to be addressed. During the first board meeting, such matters may include:

Appointing a chairman
Confirmation of company formation details
Consulting the articles of association
Issuing share certificates to shareholders
Determining the rights and powers of the directors
Assigning various duties and responsibilities to directors
Verifying the company’s accounting reference date (ARD)
Confirming the statutory filing deadline for the first annual return and annual accounts
HMRC registration for Corporation Tax, VAT and PAYE.
Company insurance and licence requirements
Appointing a company secretary
Record-keeping and accounting requirements
Appointing an accountant
Opening a business bank account
Raising capital
Recruitment
Marketing and advertising
Suppliers and service providers
Suggestions and recommendation for the business

Decision-making

Directors normally have an equal say in matters pertaining to company business and policy. When a decision is put to a vote at a board meeting, each director is usually entitled to one vote, unless the articles states otherwise. When a consensus – a majority agreement for or against a proposed resolution – is obtained, a decision has been reached. If no consensus is reached, the chairman of the board is usually given a second or casting vote in order to reach a decision. Many companies adopt a manual outlining the rules and procedures of board meetings.
Calling a board meeting

Board meetings can be called at any time by the chairman of the board or an individual director. Reasonable notice of the meeting must be provided to all directors, but there is no provision in the Companies Act regarding a minimum notice period for board meetings. This is one of the points that can be set out in the board meeting manual. One week is usually sufficient.

The notice should state the following details:

Time, date and location of the meeting
Purpose of the meeting
Any proposed resolutions
Schedule of proceedings

Minutes of board meetings

It is a legal requirement that minutes be taken of all board meetings. This is usually the responsibility of the company secretary. Minutes are simply a record of the proceedings of the meeting, and they will usually include:

Company name
Names of those present
Chairman of the meeting
Apologies for any absences
Time, date and location of meeting
Details of proposed resolutions
Result of any votes
Objections raised
Record of those for and against any proposed resolution
Summary of other items of business discussed
Chairman’s signature

Board meeting minutes are usually kept at the back of the company registers (a bound book or loose-leaf binder) at the company’s registered office or principal place of business, but they may also be kept in electronic form. They can be inspected at any time by directors and auditors; however, members, creditors and the general public are not permitted to inspect the minutes of directors’ meetings.

General meetings

A general meeting is a meeting of the members of a limited company. This type of meeting is more formal than a board meeting of directors, because the calling and conduct of general meetings is regulated by the Companies Act 2006. Private limited companies are no longer legally required to hold Annual General Meetings (AGM) unless a provision to the contrary is included in the articles. Most private companies will only call general meetings when extraordinary decisions have to be made by the members, though it is good practice to hold an AGM to review the company’s performance, annual accounts and plan ahead for the forthcoming year.

Purpose of a general meeting

Shareholders will convene at a general meeting in exceptional circumstances when they need to address an issue or pass a resolution on any matter that extends beyond the directors’ powers. It is possible to pass resolutions in writing, but it is often more beneficial to formally and collectively discuss a proposed resolution at a general meeting – particularly if a company has multiple shareholders who do not interact on a daily basis. If you are a sole director and shareholder of your own company, you will not need to hold any general meetings, because you are the sole decision-maker.

The types of matters discussed at a general meeting may include:

Appointing or removing a director
Altering the articles of association
Changing the shareholders’ agreement
Changing the company’s share structure by issuing more shares or creating different classes of shares
Approving directors’ loans
Approving directors’ service contracts
Adding or removing directors’ powers
Appointing or removing an auditor
Changing the company structure
Approving the transfer of shares as proposed by a director

Under the Companies Act 2006, all members’ decisions can be made by written resolution, with the exception of dismissing a director or removing an auditor before the end of their contractual period. It is possible to include provisions in the articles to further restrict decision-making by written resolution, if required.
Notice period

A general meeting can be called by the company directors or shareholders. A minimum notice period of 14 days is required for calling a general meeting in a private limited company. The notice must be sent to every member and director, and any persons entitled to a share on the death or bankruptcy of a shareholder. Notice can be given in hard copy form, electronic form or by posting it on the company website. The following information should be disclosed on the notice:

Time, date and location of the general meeting
Purpose of the meeting
Proposed resolutions to be agreed
Statement that every shareholder may appoint a proxy if they are unable to attend
Notice date
Name(s) of director(s) or shareholder(s) calling the meeting

Minutes of meetings

The company secretary (or director) must arrange for minutes to be taken to record the names of those present at the meeting, a summary of the proceedings and the outcome of any proposed resolution. A copy of the minutes should be kept in the company’s statutory register held at the registered office or principal place of business for a minimum of 10 years. Copies should also be issued to the company members.
Resolutions

A resolution is a legally binding agreement or decision made by company members or directors. The outcome of a resolution is determined by the votes cast for and against the decision. If the required majority is reached, the resolution is ‘passed’. If the necessary majority is not reached, the proposed resolution fails.
Different types of resolutions

Any decision made by the directors of a company is called a resolution, but there are two types of members’ resolutions: ordinary and special.

An ordinary resolution is passed when a simple majority vote is reached (above 50%). This type of resolution can be used for all decisions unless the Companies Act or articles of association specifies the need for a special resolution for any other matter.

A special resolution is passed when a 75% majority vote is reached.

Both types of resolutions can be passed at a general meeting or in writing (a written resolution), apart from a resolution to dismiss a director or remove an auditor before the expiration of his or her contract. If a member is unable to attend a general meeting, he or she can appoint a proxy.
Passing a resolution

Voting at general meetings is normally taken by a show of hands or a poll. If the vote is taken as a show of hands, the percentage is worked out as one vote per shareholder. If a poll is taken, the votes are worked out in proportion to the number of shares held by each shareholder – most shares carry one vote; therefore, shareholders with multiple shares can cast more votes.

The conditions of members’ voting rights are usually stated in the articles of association and shareholders’ agreement. Generally, however, a member will have the same number of votes whether passing a resolution at a general meeting or on a written resolution.

Resolutions must be proposed in the notice that is circulated prior to a board meeting or general meeting. Proposed members’ resolutions must be also be issued to the auditors, if a company has any. If the proposed resolution is for the removal of a director, the director in question must receive a copy.

Copies of all special resolutions should be filed with Companies House within 15 days and issued to all shareholders and the company auditor, if applicable. Copies should also be kept in the company’s statutory register at the registered office address or principal place of business for a minimum of 10 years.

What is a Limited Company?

A limited company is a legal business structure that is registered with Companies House – the Registrar of Companies in the United Kingdom – through the process of incorporation. When a company is formed through Companies House, it becomes an individual in the eyes of the law. As such, a limited company is a completely separate individual from its owners, because it is responsible for its own actions, finances and liabilities.

Why would you want a Limited Company?

Limited companies have the unique advantage of allowing business owners to benefit from company profits without personal liability. The financial liability of company owners is limited to the value of their shares or financial guarantees, which means they are only required to cover business debts up to the amount they invest or agree to pay if the company runs into financial difficulty. This type of protection is known as limited liability.

One of the most important obligations of a limited company is the disclosure of corporate and financial information. This is achieved by adhering to a number of annual filing requirements and event-driven obligations, including: the submission of confirmation statements, filing tax returns and annual accounts and reporting any significant changes in the business. All of this information is placed on public record.

Any type and size of business can operate as a limited company, and there are many financial and professional benefits to be gained – limited personal liability, tax-saving opportunities, enhanced professional status and investment opportunities are the main advantages of limited company formation.

Different types of limited companies:

Private Limited by Shares (LTD)
Private Limited by Guarantee (LTD)
Limited Liability Partnership (LLP)
Public Limited Company (PLC)
Private Unlimited Company

Private Limited by Shares (LTD)

This is the most common type of limited company structure for any type of business that wishes to make a profit for its owners. A private company limited by shares is owned by one or more ‘shareholders’, and managed by one or more ‘directors’. One person can be the sole shareholder and director of a company, or multiple people can be shareholders and/or directors of a company. This means you can set up a company limited by shares on your own.

Companies limited by shares are required to issue portions of the business as ‘shares’. Each shareholder must agree to buy one or more of these issued shares. This determines how much of the company each shareholder owns and the amount of money they are legally required to invest. If the company accrues debts that it cannot afford to pay, the shareholders must contribute the value of their unpaid shares toward the financial liabilities of the business; therefore, the number and value of each shareholder’s shares determines the limit of their personal financial liability.

Limited companies must pay corporation tax on all taxable income. Post-tax profits are then issued to shareholders in relation to the number and value of their shares. Alternatively, the company may choose to reinvest surplus income in the business.

Key features and benefits:

Can be owned and managed by one person or multiple people.
Personal liability of shareholders is limited to the value of their shares.
Company enjoys limited status which is more appealing to clients, investors and lenders.
Company can sell shares to raise capital.
A tax-efficient way to run a profit-making business.
Shareholders can keep all company profits for their personal use.

The legal requirements:

Must be incorporated with Companies House.
Minimum of one shareholder and one director aged 16 or above, but these roles can be filled by the same person.
Registered office must be situated in the country of incorporation.
Company details are placed on public record, including directors’, shareholders’ and PSC details and financial accounts.
Articles of association must be adopted to outline the company’s operational rules and regulations.
Director is responsible for delivering a number of statutory reports to Companies House and HMRC every year and notifying Companies House when any company details change.
Surplus income can only be taken out of the company as a director’s salary, shareholders’ dividends, a director’s loan or reimbursement of expenses.

Private Limited by Guarantee (LTD)

You should register a company limited by guarantee if you are planning to run a non-profit organisation. This type of business generally falls into one of two categories:

A non-profit company like a sports club, society, workers co-operative, etc.
A charitable company which uses its ‘profits’ for charitable purposes only.

In most cases, a company limited by guarantee will not distribute any profit to its members (guarantors) – surplus income will be reinvested in the business, instead.
Who owns a company limited by guarantee?

A company limited by guarantee is owned by one or more ‘guarantors’. A minimum of one director must be appointed to manage the company on behalf of the guarantors; however, it is also possible for one person to be the sole guarantor and director of a company. This means you can incorporate a company limited by guarantee on your own.

Each guarantor is required to financially back the business in the form of a ‘guarantee’ – no shares are issued in this type of company. If the company accrues any debts, each guarantor is legally required to contribute the sum stated in their guarantee. This is the limit of their personal financial liability.

Key features and benefits

This type of company has guarantors and guarantees instead of shareholders and shares.
Guarantors protect their personal finances with limited liability – they are only responsible up to the sum of their guarantee, not the total debts of the company.
Company has ‘limited’ status – this is preferred by many clients, suppliers and investors because of added credibility and transparency.
Company has the option to register for charitable status (subject to the articles being in the correct format). Profits can be distributed to members if stated in the articles of association – if this option is selected, the company is unable to claim charitable status.

The legal requirements

Must be incorporated with Companies House.
Minimum of one guarantor and one director, but you can choose the same person to fill both positions.
Registered office must be situated in the UK country of incorporation.
Company details are disclosed on the public record, including directors’ and guarantors’ and PSC’ details.
Memorandum of association must be created.
Articles of association must be adopted – this is a governing document that outlines the rules and regulations for running a company, stating the company’s objects (aims), and what will be done with any residual income.

Additional information

We will complete your limited by guarantee company formation online, including the supply of standard articles of association. You can download these documents and easily edit them to reflect your non-profit organisation goals.

Limited Liability Partnership (LLP)

A limited liability partnership is more or less the same as a normal business partnership, but it has the added benefit of limited liability – the partners in a traditional partnership have unlimited financial responsibility for business debts, which means their personal finances are at risk if the partnership runs into difficulty or becomes insolvent. LLP partners guarantee to each pay a fixed sum of money toward business debts if the LLP cannot pay its bills. These guarantees set the limit of their personal financial liability.
The three distinctive features of an LLP are:

It is taxed as a partnership – no corporation tax liability.
It can appoint an unlimited number of LLP members (partners) rather than defined directors or shareholders.
Required to comply with the Limited Liability Partnerships Act 2000 instead of the Companies Act 2006.

Who would use an LLP?

LLPs are increasing in popularity because they combine the practicality of a limited liability company and the flexibility of a traditional partnership. They are popular in sectors where partnerships are prominent – doctors, architects and solicitors, for example.

Key features and benefits

LLP profits are shared between members.
The LLP is ‘tax transparent’ because individual members are taxed on their own profits, rather than the business paying Corporation Tax as a single entity.
The partnership can include other companies as members – if this is the case, profits become subject to Corporation Tax instead of income tax.
There is no requirement for members to reside in the UK.
Internal structure of the business can be decided collectively by the partners.
The rights, responsibilities and duties of LLP members are usually equal, but there is a great deal of flexibility in a partnership structure which enables rights and profit distribution to vary between each member, if required.

Key features and benefits

LLP profits are shared between members.
The LLP is ‘tax transparent’ because individual members are taxed on their own profits, rather than the business paying Corporation Tax as a single entity.
The partnership can include other companies as members – if this is the case, profits become subject to Corporation Tax instead of income tax.
There is no requirement for members to reside in the UK.
Internal structure of the business can be decided collectively by the partners.
The rights, responsibilities and duties of LLP members are usually equal, but there is a great deal of flexibility in a partnership structure which enables rights and profit distribution to vary between each member, if required.

Legal requirements of an LLP

Incorporated through Companies House.
Must have at least two members (there is no maximum number of members).
At least two members must be ‘designated’ members – they are responsible for assuming additional filing and reporting duties on behalf of the LLP.
Registered office address must be located in the UK country of incorporation.
You must inform HMRC of your LLP’s existence and prepare an annual partnership tax return. A designated member is allocated responsibility for these duties.
Partnerships must be set up with the intention of making a profit – an LLP is not a suitable structure for non-profit ventures.

Additional information

If you are not dividing profits, rights, and responsibilities equally between all partners, you can draft an LLP Agreement or Partnership Statement to outline the terms of the partnership. Although this is not a legal requirement, we do recommend one to promote clarity and prevent disputes.

Our’ LLP formation package comes with a free LLP Agreement for those who need it.

Public Limited Company (PLC)

A public limited company trades on the open stock market (London Stock Exchange, for example) and sells shares to the general public. This type of limited company structure must have an issued share capital of at least £50,000; therefore, PLCs are generally reserved for larger, established corporations.

PLCs must have a minimum of one shareholder, two directors, and one qualified company secretary.

Is there anything else to pay?

No. The cost of this service includes the Companies House filing fee.

How long does it take to dissolve a company?

It usually takes Companies House 2 to 3 months to close a company.
Under what circumstances can a company not apply for voluntary dissolution?

A company cannot apply for voluntary strike off under the following circumstances:

It has traded or sold stock in the last 3 months
It has changed its name in the last 3 months
It is the subject of legal proceedings against it
It is in, or about to enter liquidation
It has entered into a credit agreement (eg. CVA)

If your company cannot apply for dissolution due to any of the above circumstances, you should instead apply for voluntary liquidation to close it down.
My Registered Office and Service Addresses are about to expire – do

I need to renew these first?

Customers who are using our Registered Office and Service Address do not need to renew their services if they are about to expire or have just expired. We will continue forwarding all statutory mail throughout the dissolution process.

What happens once the DS01 form has been submitted to Companies House?

We will notify you by email once your application has been accepted by Companies House. You will then be informed by Companies House in writing, once the company is dissolved.

Should I close my company’s business bank account?

Yes, you should close your company’s bank account before you apply. From the date a company is dissolved, its bank account will be frozen and any money in the account, together with any assets still in the company’s name, will pass to the Crown.

Company name legislation

Before you can register a limited company, you must choose a company name. There are a few requirements and restrictions – but generally, you have quite a lot of freedom when it comes to naming your new company. The main legislation that governs company names is:

Companies Act 2006, the Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 (SI 2015/17)
The Company, Limited Liability Partnership and Business (Sensitive Words and Expressions) Regulations 2014 (SI 2014/3140) Regulations 2014.

Rules and Regulations

You cannot register a company name that is exactly the same as, or similar to, the name of another registered company, unless permission is granted from the existing company or LLP, or the new company or LLP is intended to be part of the same group. A company name will be considered the ‘same as’ if it is so similar to another name that it is likely to confuse the public as to which company is which.
Company names may not contain any ‘sensitive’ words or expressions, unless permission is granted from the Secretary of State at Companies House, or another authorising body.
The use of certain characters, signs, symbols and punctuation in company names are not permitted.
The names of all private limited companies must end with ‘Limited’ or ‘LTD’. Companies with a registered office in Wales may use ‘Cyfyngedig’ or ‘CFY’.
The names of all Limited Liability Partnerships must end with ‘Limited Liability Partnership’ or ‘LLP’. LLPs with a registered office address situated in Wales may use ‘partneriath atebolrwydd cyfngedig’ or ‘PAC’.

What are sensitive words and expressions?

The use of certain sensitive words in business names may give a misleading indication of the status of a business or the nature of the activities being carried out by a business. Controls over sensitive words and expressions are therefore in place to ensure the public is not misled or harmed in any way. The list of sensitive words does not prohibit the use of any word: it simply highlights words which need to be considered by a specified body (e.g. Financial Conduct Authority, The Charities Commission, The Department of Health, Ministry of Justice) before they are used within the name of a company.

As per The Company, Limited Liability Partnership and Business (Sensitive Words and Expressions) Regulations 2014, unless an email or letter of non-objection is obtained from the Secretary of State at Companies House or other specified body, a company name must not:

Suggest business pre-eminence, a particular status or a specific function.
Imply a connection with the Royal Family, the UK Government, a devolved administration, a local authority or a specified public authority.
Include any words that represent a regulated activity.
Constitute an offence or include any offensive words.

A full list of sensitive words and expressions that require consideration, and details of the relevant bodies whose permission must be sought, can be found here.
Obtaining permission

The specified bodies do not have to approve company or business names, they only have to confirm they have no objections. It is important that ‘not objecting’ to the use of a name is not seen as giving support or endorsing a particular company. The body simply confirms that the use of the sensitive word is acceptable at the time and consistent with the objectives of the company.

Once the views of the specified body have been made, the Secretary of State is able to approve the name. In some cases, the use of a name needs to be supported by certain criteria. For example, use of the word ‘University’ to describe an institution will only be supported if the applicant meets the government criteria (i.e. has degree awarding powers), whilst other cases (e.g. a pub near a campus requesting the name “The University Arms Ltd”) are considered on a case by case basis to establish whether the use is appropriate and not misleading.

If and when you obtain consent from a specified government department or public body, you must include the email or letter of non-objection with your company formation form. Simply upload and attach it to your online application. Companies House will reject your application without this supporting documentation. If the authorising body for the designated sensitive word or expression is the Secretary of State (Her Majesty’s Principal Secretary of State for Business, Innovation and Skills – more commonly known as the Business Secretary), Companies House will act on his or her behalf.

Checking the availability of a company name

Prior to completing your company formation application, you must ensure your proposed company name is not the same as, or too similar to, the name of an existing company on the index of company names. You can use our free name-check facility to do this. Simply click the green ‘Start’ button on our homepage to find out if your chosen name is available. Our name-checker will also tell you if your proposed name contains any sensitive words or expressions, prohibited characters, signs or symbols.

You should also check the Trade Marks Register of the UK Intellectual Property Office to ensure that the proposed name does not infringe an existing trade mark. The Institute of Trade Mark Attorneys can assist with such matters if need be.

If you’re lucky enough to get your first choice of name, that’s great – you can go ahead and set up a limited company. If your proposed name is taken, you will have to alter the name until you find one that is available. Remember to include ‘Limited/LTD’ or ‘Limited Liability Partnership/LLP’ at the end of the name, otherwise your application will be rejected.
Dissolved company names

You can incorporate a limited company with the name of a dissolved company; however, we strongly advise thoroughly researching the dissolved company’s activities and history before doing so. The last thing any new business needs is negative association with an old company.

You should first carry out an online check to see what comes up. Consider requesting the last set of accounts from Companies House to determine the financial state of the dissolved company when it was wound up – this could give you an indication of its reputation. Carrying out a credit check would also be a good idea to find out whether the dissolved company had any County Court Judgements (CCJs) against its name from leaving its creditors high and dry.
Changing a company name after incorporation

It is very easy to change your company name online after incorporation. This is one of the few post-formation changes for which Companies House charges a fee – the standard change-of-name fee is £8.00. You will need to obtain the approval of the company members or directors (depending on the provisions of your articles of association), carry out the same name availability checks as during the company registration process and submit a request to Companies House.
How to change a company name

There are two ways in which a change of company name can be approved: by resolution of the directors, or by special resolution of the company members (shareholders or guarantors). To determine the appropriate procedure, you must refer to your company’s articles of association.

1. Resolution of company directors

If your company was incorporated with bespoke articles of association, it may be worth checking whether they contain any special provisions enabling the directors to change the company name without shareholder approval. However, if like most companies, it was incorporated with model articles, you must obtain shareholder approval of any change to company name, in the way described above, via a special resolution.

Simply complete Form NM02 ‘Notice of change of name by means provided for in the articles’, and deliver it to Companies House electronically with the £8.00 processing fee and any required supporting documentation for sensitive words. You can do this through Companies House WebFiling. Alternatively, you can change your company name online in just 24 hours through Ours’ Client Admin Portal. Additional documentation can be uploaded and delivered to Companies House using this service.

2. Special resolution of company members

If your company’s articles do not provide for a change of name by the directors, the members must pass a special resolution at a general meeting or in writing. This type of resolution requires at least 75% of members’ votes to be cast in favour of the change.

When the required quota has been achieved, a company director should complete Form NM01 ‘Notice of change of name by resolution’ and deliver it to Companies House within 15 days of the resolution being passed, along with the £8.00 change-of-name fee, a copy of the members’ resolution and any supporting documentation for sensitive words.

You can notify Companies House through WebFiling, or you can change your company name online in just 24 hours through Ours’ Client Admin Portal. You can easily upload and deliver additional documentation using this service.

How to change the name of an LLP

To change the name of an LLP, you must obtain the approval of all partners (LLP members), unless the Partnership Agreement states otherwise. When a change of name has been agreed, Form LL NM01 should be completed by a designated member and delivered to Companies House online or by post. Alternatively, you can change your company name online in 3 hours by notifying Companies House through our Client Admin Portal.

When your new company name is approved

Companies House will issue a Certificate of Incorporation on Change of Name to verify the amendment. You cannot start using the new name until you receive this document.
The rest of your registration details will remain exactly the same as they appear on your original Certificate of Incorporation, including your company registration number (CRN) and date of company formation.
It is important that you retain your original certificate of incorporation as well as the Certificate of Incorporation on Change of Name – the new certificate is not a replacement; it only contains information about the change of name and the date it occurred.
Companies House will update the public register to reflect the change of name.
You must start using the new name within two weeks of receiving the certificate of incorporation.
You must notify your clients, suppliers and service providers as soon as possible, change the name of your business bank account and update all company stationary, websites and signage accordingly.

Paying yourself – PAYE, dividends and loans

Paying yourself through a limited company is different from paying yourself as a sole trader. You and your company are not the same – the company exists as entirely separate in the eyes of the law; therefore, all income belongs to the company in the first instance. To receive personal income from your company, you will have to pay yourself a salary through PAYE or issue dividend payments if the company has retained profits to pay these dividends from. You can also reimburse yourself for business expenses and receive director’s loans to borrow or reclaim money from your company.

Most companies use an accountant to take care of their finances. We strongly suggest seeking professional advice to ensure your new business is as tax-efficient as possible. Whilst you may be reluctant to pay accountancy fees, it is often a false economy to take care of your own business finances and accounting requirements.

Paying yourself a director’s salary

If you are a company director, you can pay yourself a salary for your role. You must register your company as an employer with HMRC and operate PAYE as part of your payroll if you plan to pay yourself, or any employees, more than £118 per week (£512/month or £6,136 per annum). The company will have to deduct any Income Tax and Class 1 National Insurance Contributions from your salary through PAYE. These deductions should be paid to HMRC, in addition to employers’ Class 1 National Insurance Contributions on any employees’ earnings above £166/week.

If you plan to run payroll yourself, you must report all employees’ payments (including your director’s salary) and deductions to HMRC. Your payroll software will calculate the amount of tax and NIC you owe. You can send the required payments to HMRC on a monthly basis.

How much should I pay myself?

You can pay yourself whatever you like, provided the company has enough money to do so. Many directors, however, choose to keep their annual salary above NIC Lower Earnings threshold but below the Personal tax-free Allowance threshold. For the 2019-20 tax year, these thresholds are £8,632/year (NIC) and £12,500 (Income Tax threshold).

If you keep your salary below the NIC threshold, you will not have to pay any National Insurance or Income Tax to HMRC. If you take more than the NIC threshold but less than your tax-free Personal Allowance, you will only have to pay NICs on your salary between £8,632 – £12,500. Salaries above £12,500 will be liable for Income Tax and National Insurance.

Additional income

You do not have to limit your annual income to £12,500 – you can take additional income as dividend payments. Dividends are paid out of company profits after the deduction of corporation tax (19%) but you will not have to pay Income Tax on these payments, thus providing a tax-efficient way to remove money from your company.
Dividends

If your company has made enough profit/has surplus retained earnings, you can pay yourself dividends to top up your director’s salary. Dividends are paid to shareholders after the company has paid corporation tax on its taxable income, but there is no Corporation Tax liability on the dividend payments themselves, only Income Tax.

Corporation tax is currently 19%, whilst Income Tax rates range from 20% to 45% as your income increases; therefore, it is better to take part of your income as a salary and the rest as dividends, rather than taking your entire annual earnings as a salary and paying more Income Tax. You will have to pay income tax on your dividend payments whether you are a higher or lower rate taxpayer, but tax rates on dividends are lower than Income Tax rates.

How to issue a dividend

You must hold a directors’ meeting to ‘declare’ dividends. If you are the only director, you still have to hold a ‘meeting’ and take minutes to record the decision – this is simply a formality. It may sometimes be necessary for the shareholders of the company also to approve the dividend with a resolution (this is normally only required for final dividends – you’ll need to check your articles for the full process). You can only declare dividends if your company has sufficient retained profits after all business expenses and costs have been paid, otherwise the dividend will be considered unlawful.

When a dividend is declared, you must write up a dividend voucher with the following details:

Date of issue
Name of your company
Name of the shareholder being paid the dividend
Amount of the dividend

You should provide a copy of the dividend voucher to the recipient of the dividend, and keep another copy with the company’s statutory records at your registered office or SAIL address. You can get dividend templates online or from an accountant.
Reporting dividends to HMRC

Because dividends are not issued and taxed through PAYE, you will have to complete a Self-Assessment Tax Return every year to report this additional income to HMRC. Please see our ‘Tax and HMRC Requirements’ guide for information about Self-Assessment.
Directors’ loans

A director’s loan is another option for taking money out of your limited company. The loan may be:

Money borrowed from the company by a director
Money borrowed by the company from a director
Reimbursement of money put into the company by a director

If you take more money out of your company than you put in – other than by way of a salary, dividends and expense repayments – the payment will be considered an overdrawn director’s loan and will require to be repaid in the future (usually 9 months). If you lend or pay money to your company, it is also considered a director’s loan and if you later wish to reclaim money that you have invested in your company, you will also have to record the payment in the director’s loan account.

You must keep a record of any money you borrow from or pay into the company in a director’s loan account. At the end of the financial year, you must include any money you owe the company, or the company owes you, on the balance sheet in your annual accounts. There may be tax implications for you and/or the company if the loan account is overdrawn. You should consult an accountant if you wish to extract or lend money by way of a director’s loan, because it is a complex area.

Introduction to keeping records

You must keep a number of records about your company or LLP, (including statutory records and registers) about the business itself; as well as financial and accounting records to complete tax returns and work out tax payments. You can take care of these record-keeping and accounting requirements yourself, but it can be somewhat time-consuming and complex, so you may prefer to hire an accountant to assist with your book-keeping and tax affairs.

Records about your company or LLP

When you set up a limited company or limited liability partnership, you will be required by law to keep (where applicable) the following statutory records and make them available for public inspection at your registered office or SAIL address:

Register of directors – details of all past and present directors
Register of directors’ residential addresses
Register of LLP members’ residential addresses (not available for public inspection)
Directors’ service contracts
Directors’ indemnities – insurance that protects directors from personal liability to the company
Register of company members – details of all past and present shareholders or guarantors
Register of company secretaries – details of all past and present secretaries
Register of LLP members – details of all past and present LLP members, and which of those are designated members
Register of PSC
Register of charges – record of loans or mortgages secured against the company’s or LLP’s assets
Record of debenture holders – long term security yielding a fixed rate of interest, issued by a business and secured against assets
Records of resolutions and minutes of meetings
Contracts of memoranda relating the purchase of own shares
Documents relating to the redemption or purchase of own shares out of capital by a private company
Certificate of incorporation
Share certificates and Stock Transfer forms

Memorandum and articles of association

You may keep all or some of these records at your registered office, or you may choose an alternative location (a SAIL address) to keep some or all of these records and make them available for inspection; however, all records of a similar type must be kept together in the same location and you must tell HMRC which records are at which address.

Statutory registers should be kept for the life of your company or LLP. Minutes of meetings and copies of resolutions must be kept for a minimum of 10 years from the dates they are produced.
Financial and accounting records

Every company and LLP must keep accurate financial and accounting records, regardless of whether the business is actively trading or dormant. These records should include, where applicable:

Record of all sales and income:
Cash receipts
Till rolls
Sales invoices
Bank statements
Pay-in slips
Accounts books
Record of all purchases and expenses:
Cash purchases
Receipts
Purchase invoices
Bank and credit card statements
Chequebook stubs
Motoring expenses and mileage records
Accounting records
Details of all payments made to subcontractors for work carried out and materials they have purchased – for example, subcontractor invoices
Record of assets and liabilities
Statements of stock held by the business at the end of each financial year
Statements of stock takings from which the statements of stock have been taken or prepared
Statements of goods and services bought and sold, other than by ordinary retail trade. This should include a list of the goods, buyers and sellers
Copies of past annual accounts, Company Tax Returns and Self-Assessment tax returns
VAT records:
Copies of all invoices issued
Originals of all invoices received
Self-billing agreements – invoices prepared by customers
Name, address and VAT number of any self-billing suppliers
Debit or credit notes
Import and export records (delivery notes, for example)
Items that VAT cannot be reclaimed on – business entertainment costs, for example
Records of any goods given away or taken from stock for private use
Records of all zero-rated, reduced or VAT exempt items bought or sold
A VAT account – separate record to the VAT your business charges and pays on purchases.
General business records such as bank statements, cash books, cheque stubs, pay-in slips and till rolls
PAYE records
Payments made to employees
Deductions from employees’ wages of Income Tax, National Insurance Contributions and Student Loan repayments
Details of employee benefits and expenses
Records of statutory payments – Maternity Pay, Paternity Pay, Sick Pay

How long must a company or LLP keep these records?

Private companies and LLPs must keep accounting records for a minimum of 3 years from the dates they are produced.
PAYE records must be kept for a minimum of 3 years from the end of the tax year to which they relate.
VAT records must be kept for a minimum of 6 years. They can be kept on paper, in electronic form, or as part of a software programme.
Contractors in the Construction Industry Scheme (CIS) must keep CIS records for three years.
Records for completing personal tax returns (Self-Assessment) need to be kept for at least 5 years after the 31st January submission deadline of the relevant tax year.

As a general rule, however, you should keep all financial statements, accounting records and tax returns for at least 6 years.
How to keep records

The law does not state how you must keep the majority of business and accounting records, but you will have to keep some original documents that show that tax has been deducted, for example: form P60 End of Year Certificates for PAYE. It is good practice to keep all original documents you receive.

CIS vouchers, dividend vouchers and bank interest certificates must be kept in their original format. Most records can be kept electronically (on a computer or any storage device such as disk, CD, memory stick or microfilm) as long as the method you use captures all the information on the document (front and back), and allows the information to be presented in a readable format.
Inspection of records

You must make your business and accounting records available for inspection at your registered office address. You may also make some or all of these records available at a SAIL address if this is more convenient, but you must notify Companies House of this address and the records you keep there.

Statutory records should be available for inspection by HMRC, Companies House, and members of the general public between the hours of 9am-3pm every working day. They may be inspected for a period of up to 2 hours. Any request from a member of the general public should be for a ‘proper purpose’ and contain the following information:

Name and address of person, company or organisation making the request
Purpose of inspection
Who the information will be given to, and how the information will be used

The required notice period for inspection of records is 10 working days, unless the inspection date falls within the notice period of a general meeting or a written members’ resolution. In such instances, the required notice period is just two working days. A company director or secretary, or an LLP designated member must reply to any request made for a ‘proper purpose’ within 5 working days. Failure to do so could result in a fine.

Introduction to reporting

There are certain company and LLP changes that must be reported to Companies House, and, in some cases, HMRC. Most corporate information is displayed on public record, so it is important that you notify Companies House about changes to your company or LLP as soon as possible, to ensure the correct information is made available to the general public. The majority of changes can be reported online, free of charge.

It is the responsibility of company directors, company secretaries and LLP designated members to notify Companies House, HMRC and all other relevant parties about certain changes, some of which must be reported within a specified period of time. Most changes will also have to be recorded and updated in your statutory records.

The changes you must report include:

Company or LLP name
Registered office address
Single Alternative Inspection Location (SAIL address)
Moving statutory records
Which records you keep at a SAIL address
Officers’ and members’ details
Accounting reference date (ARD)
Share structure
Articles of association

In order to report changes to Companies House, you will need the email address and password you used to sign up for Companies Houses online services and the authentication code Companies House sent to your registered office address. If you have not registered for an online account, you will have to do so before you can report changes electronically.

Changing the name of your company or LLP

Check the availability of the proposed name against the register of existing companies/LLPs. Please refer to our ‘Company Name guide’ for information about choosing a new company name and the required procedures for authorising the change internally.
To report the change to Companies House, a director or LLP designated member must send the appropriate form by post or online. These forms can be found on Companies House’ website. You can also use Quality Company Formations Software Filing Service to notify Companies House. Remember to include a copy of the members’ resolution and supporting documentation for sensitive words and expressions, if applicable.
You must report a change of company name within 14 days of passing the members’ resolution.
You will have to pay an £8 processing fee to Companies House (or £10 if you use the paper form). When the change is approved, a Certificate of Incorporation on Change of Name will be issued to confirm the new name and the date it took effect. You must not start using the new name until you receive this certificate.
Notify all relevant departments of HMRC, including Corporation Tax, Self-Assessment, VAT, PAYE and the Construction Industry Scheme (CIS). You can do this by logging in to your HMRC online account.
Ensure all company/LLP signage, stationery and websites are updated as soon as possible after the change.
Notify your customers, suppliers, service providers, bank and all other relevant parties immediately.

Changing your registered office address

Limited companies and LLPs can change their registered office details any time after company formation, as long as the new address is located in the same part of the UK that the company or LLP is registered, i.e. England and Wales, Scotland or Northern Ireland.
You should notify Companies House about a change of registered office within 14 days of the change taking place. You can use Companies House form AD01 or LLAD01 to report the change online or by post, but you will find Quality Company Formations’ free Software Filing system the quickest and most convenient option.
You should not start using your new address or update your business stationery until Companies House has officially approved the change. In most cases, however, the change of address will be approved and updated on public record within 3 working hours.
When you have received confirmation from Companies House, you should update your website and business stationery to reflect the change of address. Remember to place a sign at your new registered office with your company/LLP name.
Companies House will notify HMRC of the change of address on your behalf. Your statutory company mail will thereafter be delivered to your new registered office.

SAIL address and the location of statutory records

If you decide to keep some or all of your statutory records at a location other than your registered office address, you will have to tell Companies House as soon as possible that you are using a SAIL address – you can do this online or by post using Companies House Form AD02.
You will have to tell Companies House which company or LLP records have moved to the SAIL address. Form AD03 can be used to report this information.
If you are moving some or all of your statutory records back to the registered office from a SAIL address, you must report the changes on Form AD04.
All of these changes should be reported to Companies House within 14 days of the change taking effect.

Changing officers’ and members’ details

You will have to tell Companies House when you appoint or remove company directors and secretaries, when LLP members join or leave a partnership and when the details of existing company directors, company secretaries, and LLP members change after incorporation. All of these changes are free of charge and relatively easy to report, but you must ensure Companies House is notified within 14 days of the change(s) taking effect.

To change any of the following details, you can use Quality Company Formations free Software Filing Service to deliver information quickly and securely to Companies House. Changes are normally updated on the public register within approximately 24 hours. The applicable Companies House forms are listed below for reference purposes only:

Appointing a new director – Form AP01 or AP02.
Termination of appointment of a director – Form TM01.
Appointing a new company secretary – Form AP03 or AP04.
Termination of appointment of a company secretary – Form TM02.
Change of director’s details – name, service address, usual residential address, country of residence, nationality, or business occupation – Form CH01. Please note: you cannot change a director’s date of birth, because this is the one detail that should always remain the same, for obvious reasons. If you registered the wrong DOB, you will have to send RP CH01 and RP02a forms by post to Companies House
Change of secretary’s details – Form CH03 or CH04.
Appointment of a member of an LLP – Form LL AP01.
Termination of appointment of member of an LLP – Form LL TM01.
Change of LLP member’s details – Form LL CH01 or CH02.

Changing the details of company shareholders

You do not have to tell Companies House immediately when a shareholder joins or leaves a company, or when an existing shareholder’s details change. This information should be reported on the confirmation statement. You may file a confirmation statement if you wish to report such changes straight away, or you can wait until the next confirmation statement is due. The public register will not be updated until a confirmation statement is delivered.
Changing your accounting reference date (ARD)

Your accounting reference date is the end of your company’s or LLP’s financial year. It is normally 12 months’ long. You can change the ARD at any time, as long as your annual accounts are not already overdue. You may:

Shorten your financial year as many times as you like, as often as you like
Lengthen your financial year up to a maximum of 18 months, once every 5 years

However, you may lengthen your financial year more than once every 5 years if:

Your company or LLP is in administration
You are aligning dates with a subsidiary or parent company
You have special permission from Companies House

To change your ARD, you can file Companies House form AA01 (form LL AA01 for LLPs) by post or online, or you can report the change immediately using our secure online Filing service.
Changing your company share structure

If you wish to sell shares in your limited company after incorporation, you can either issue more shares or sell existing shares. To issue more shares, you will have to complete a ‘Return of Allotment of Shares’ for Companies House. To sell existing shares that belong to you or another shareholder, you will have to complete a Stock Transfer form.

There are a number of restrictions that may be present in the articles of association and/or a shareholders’ agreement (if applicable), so you must check these documents before taking any steps. Please refer to our ‘Shares’ guide for more information.
Allotting new shares

A company director must complete a Return of Allotment of Shares (Form SH01) for Companies House, and deliver it within one month of the date of allotment(s). You can file this form online through Companies House WebFiling.
Transferring existing shares

Shareholders can sell some or all of their existing shares by transferring ownership to someone else. A stock transfer form must be completed to authorise the transfer. There is no requirement to file this form with Companies House, but you will have to get it stamped by HMRC if the sale of shares exceeds £1,000. In such instances, the new shareholder will have to pay 0.5% of the purchase price to HMRC as Stamp Duty.

Changing the articles of association

The articles of association can be altered after company formation by passing a special resolution of the members. You must notify Companies House within 15 days of any changes taking place. To do so, you must send a copy of the articles as altered and a copy of the members’ resolution. You can deliver these documents online via Companies House WebFiling.

Registering with HMRC

Companies House automatically notifies HMRC when a limited company or limited liability partnership is incorporated. Soon after your business has been set up, you should receive a letter from HMRC at your registered office address advising you of your tax obligations and requirements. This letter will also contain your business Unique Taxpayer Reference (UTR). You will need to use this for all tax related matters.

Limited companies must register for and pay business taxes to HMRC on all forms of taxable income – this includes Corporation Tax and Value Added Tax (VAT). Limited liability partnerships are not required to register for Corporation Tax; instead LLP members have to register individually for Self-Assessment. LLPs do however have to register for VAT if their annual taxable turnover exceeds the current VAT threshold.

Corporation tax and Company Tax Returns

The trading status of all incorporated companies is either ‘active’ or ‘dormant’. If your company is not carrying on any form of business activity, it is dormant. If your company is trading, it is considered ‘active’ for corporation tax purpose and it must be registered with HMRC within three months of any form of business activity taking place. ‘Business activity’ can mean any of the following:

Selling goods or providing services with a view to making a profit.
Buying goods and services.
Leasing or purchasing land or property.
Receiving income from rental property or sales.
Managing investments – buying shares in another company and receiving dividend payments.
Issuing dividend payments to shareholders.
Earning interest.
Employing staff and operating payroll.
Paying directors’ salaries.
Advertising your products and services
Paying accountancy fees through a business bank account.
Any other significant accounting transactions (monies spent or received) that must be entered into your company’s accounting records.

Registration process

You must register for corporation tax on HMRC’s website by following these steps:

Create a Government Gateway account by providing your own name, an email address and a password.
View and accept the Terms and Conditions.
Take a note of the User ID displayed on the screen.

Provide the following details about your company:

Unique Taxpayer Reference (UTR).
Registered company name in full.
Company registration number (CRN).
Date your company became active – this will determine the start of your corporation tax accounting period.
Address where your company’s principal business activities take place.
Nature of main business activities.
Accounting reference date (ARD) – the date your annual accounts are made up to. Companies House will provide this information but it is normally the anniversary of the last day of the month of company formation.

This information will be used to work out your company’s 12-month corporation tax accounting period. Shortly thereafter, you will be given deadlines for filing Company Tax Returns and paying corporation tax at the end of each accounting period.
Corporation tax accounting period

Your accounting period for corporation tax will normally be 12 months’ long, and it will usually match your company’s financial year. Your financial year is the time covered by your annual accounts. Your accounting period will start on the date your company becomes active for corporation tax. It will end on the ARD of your annual accounts.

In the first year of trading, you may find that your accounting period is slightly longer than 12 months. This happens if a company is incorporated during a month and starts trading as soon as it is incorporated, so the trading period will be 12 months plus the part of the month when you began trading. If this is the case, you will have to prepare two Company Tax Returns: one return will report on the first 12 months; the other return will report on the additional days/weeks.

After the first year, your accounting period should align with the 12-month financial year covered in your annual accounts. It is possible to shorten your accounting period if required by following the correct procedures with HMRC.

Preparing a Company Tax Return

HMRC requires a Company Tax Return every year, even if your company fails to make a profit. You must deliver tax returns online on form CT600, with full statutory accounts and accurate computations and calculations detailing how the final figures were worked out. You may wish to hire an accountant to assist with this.
Paying corporation tax

Corporation tax is charged on all taxable income after the deduction of salaries, wages, costs, expenses and reliefs. You will not receive a tax bill from HMRC – you are responsible for working out how much tax your company owes every year by preparing annual accounts. Most small companies can use HMRC’s online accounts template, but it may be worth hiring an accountant if you have no experience in this area.

You must submit the relevant corporation tax payment to HMRC electronically – you cannot pay by post. The various options available to you are:

Faster Payment through online or telephone banking
CHAPS
Bacs
Direct Debit
Online by debit card or credit card
At your bank or building society
At the Post Office

Bear in mind the amount of time required for payments to reach HMRC. If your payment arrives late, you may be fined. However, if you pay your tax early, HMRC will pay you interest.
Deadlines

Your corporation tax payment deadline will fall before the deadline for sending your Company Tax Return:

You must pay corporation tax no later than 9 months and 1 day after the end of each accounting period.
You must file a Company Tax Return no later than 12 months after the end of each accounting period.
Full statutory accounts must be included with the Company Tax Return.

Dormant company requirements

If your company is inactive (dormant/not trading) you will not have to prepare a Company Tax Return or annual accounts for HMRC if your company has been dormant for the entirety of its accounting period, nor will you have any corporation tax liabilities. You will still be required to complete dormant company accounts for Companies House.

You must notify HMRC as soon as possible after company formation if your company is not trading, otherwise you may be asked to prepare a Company Tax Return. You can report your company’s dormant trading status by contacting your local corporation tax office – you will find their details on any official letter you receive from HMRC regarding tax.
Value Added Tax (VAT)

Value Added Tax is charged on most goods and services that are bought and sold. Businesses can add VAT to the prices they charge on the goods and services they sell to their customers.

VAT registration is compulsory if:

Your company or LLP generates taxable income in a 12-month period that exceeds the VAT threshold (increases usually by £1,000-£2,000 per year). The current vat Threshold from 1 April 2017 is £85,000.
Your business receives goods in the UK from the EU worth more than the VAT threshold.
You expect to go over the threshold in a single 30-day period.
Your business is not based in the UK, but it supplies goods and services to the UK.

Voluntary VAT registration is available if your taxable income is below the threshold, unless everything you sell is VAT exempt. This can provide a number of benefits to your small business, including:

Increasing your business profile – It gives the impression that your businesses are larger and more established, because people will assume your annual turnover exceeds the VAT threshold.
VAT registration number – You can display this number on your company website and stationery to strengthen your professional image.
VAT refunds – You can reclaim VAT on the goods and services you buy for your business, which is particularly beneficial if you sell zero-rated products and purchase standard-rated goods.
Reclaim VAT for up to 4 years in the past – You must keep the proper VAT records and invoices to be able to do this.
Appealing to more clients and suppliers – Many businesses that are VAT registered will only consider doing business with other VAT-registered businesses.

VAT rates

There are three rates of VAT that businesses are charged, depending on the types of goods or services they provide:

Zero-rate at 0% – zero-rated goods and services like food and drink for human consumption, books and newspapers, children’s clothes and shoes, and motorcycle helmets.
Reduced rate at 5% – for example home energy saving materials, children’s car seats, smoking cessation products and mobility aids for older people.
Standard rate at 20% – most goods and services, including alcohol, confectionary, snacks, and soft drinks.

Registering for VAT

Most businesses register online for VAT. You can create an online VAT account with HMRC at the same time. You must register for VAT within 30 days of your business turnover exceeding the threshold. Failure to do so may result in a penalty.

Once you have registered, HMRC will provide an online VAT registration certificate which will contain the following details:

VAT number.
Deadline for submitting your first VAT return and payment.
Effective date of registration. This will be the date your taxable turnover exceeded the threshold, or the date you asked to register if it was voluntary.

From the effective date of registration, you must do the following:

Charge the correct rate of VAT on your goods and/or services.
Pay any VAT due to HMRC – payments should be made electronically by Direct Debit or online banking.
Submit a VAT Return to HMRC in most cases for every 3-month period – the deadline is usually 1 month and 7 days after the end of each three-month accounting period.
Keep VAT records and a VAT account.

You may wish to appoint an accountant to help you deal with your tax affairs if you have no experience in this area.
Self-Assessment for directors and LLP members

Company directors and LLP members have to register for Self-Assessment (SA) in order to pay Income Tax and National Insurance on their total annual earnings. Most directors are also shareholders, which means they often receive a combination of a salary and dividends. Directors may also receive directors’ loan payments, benefits and expenses. Salary payments will be taxed at source if they exceed the Personal tax-free Allowance threshold, but any additional income has to be reported through SA in order to be taxed.

LLP members are viewed as self-employed, so they are taxed individually through Self-Assessment on the income they receive through the partnership – the LLP itself will not pay any tax, but it may have to pay VAT. Each LLP member pays Income Tax and National Insurance at the end of every tax year on their total taxable income after the deduction of business overheads and expenses.

Registering for Self-Assessment

You must register for Self-Assessment on HMRC’s website by 5th October after the tax year for which you require submitting a tax return. The tax year runs from 6th April to 5th April the following year. It can take around 20 working days to complete the registration process, as HMRC will post out information you need to register after you have started the process, so be sure to give yourself plenty of time.

To register for Self-Assessment, you will have to create a Government Gateway account, and provide details about you and your business, including your National Insurance Number. HMRC will then send two letters to your contact address:

One letter will contain your 10-digit Unique Taxpayer Reference. This number is required for filing tax returns and paying tax. N.B. this number is not the same as a company UTR.
The other letter will contain your Activation Code. You must use this code within 28 days to activate your online account. When this is complete, you will be able to file Self-Assessment tax returns online and pay Income Tax.

Filing Self-Assessment tax returns and paying tax

Self-Assessment tax returns must be submitted to HMRC by post or through your online account. The deadlines are:

Postal tax return – 31st October after the end of the most recent tax year.
Online returns – 31st January after the end of the most recent tax year.
Income Tax and Class 4 National Insurance – 31st January after the end of the most recent tax year.

Class 2 National Insurance must be paid on a weekly basis or twice per year during each tax year. Class 4 National Insurance is charged as a percentage of the total Income Tax liability – it must be paid with the final Income Tax payment by January 31st.
Registering as an employer

You must register your company or LLP as an employer if you hire any staff. For limited companies, directors are classed as employees, because they normally receive a salary. You must ensure you register as an employer before the first payday, because it can take up to 2 weeks; however, you cannot register more than 2 months before you start paying people (if you register online you can only register 28 days in advance).

To register a limited company as an employer, you will have to create a new online account (or log in to your existing HMRC account) and select ‘PAYE for Employers’ on the online tax registration form, then follow the steps. If your company is registered for corporation tax, you will already have an online account.
To register a LLP as an employer, you will have to complete an online registration form. The applicable form will depend on the number of partners in the LLP.

HMRC will send two letters to your registered office address with your PAYE and Accounts Office reference (within 5 working days) and an activation code for PAYE Online (within 10 working days). You will require this information to send payroll and PAYE information to HMRC, and pay PAYE tax and National Insurance Contributions.

Introduction to members and directors

Limited companies and limited liability partnerships are privately owned by individual people and/or corporate bodies. They are collectively known as ‘members’. Company members are called ‘shareholders’ or ‘guarantors’, depending on whether the company is limited by shares or limited by guarantee. LLP members are often referred to as ‘partners’.

Limited companies also have to appoint directors to manage day-to-day business activities on behalf of their members. Some companies also choose to appoint secretaries to assist directors with their duties and responsibilities. Collectively, directors and secretaries are called ‘company officers’.

Company members and officers are often the same people, which means a company can be owned and managed by the same people. In fact, a company need only have one member and one director; therefore, it is possible for just one person to set up a limited company and run it on their own. There is no restriction to the maximum number of members and/or officers a company has during or after incorporation.

LLPs must have a minimum of two members to be set up, but there is no upper limit to the number of partners an LLP can have. There are no officers in an LLP – there are only members and ‘designated members’. All members have the same rights, but designated members are responsible for taking on statutory reporting and filing duties on behalf of the entire partnership.
Company members

Who owns a limited company?

Private limited companies are owned by one or more individuals (human or corporate) known as ‘members’. The members of limited by shares companies are called shareholders. The members of limited by guarantee companies are known as guarantors.
Who can be a company member?

Any individual person or corporate body can be a limited company shareholder or guarantor. In most cases, company members are also directors.
What are the rights and duties of company members?

The main rights and duties of company members are:

To provide capital investment to the business.
To appoint directors.
To determine the rights and powers of directors.
To make decisions in special circumstances when directors are not authorised to do so.
To provide financial security to the company in the event of insolvency.
To receive a percentage of business profits in relation to their shares (limited by shares companies only). Limited by guarantee companies are most often set up by non-profit businesses; therefore, guarantors do not normally take any company profits for their personal use.

The financial security provided by company members is known as ‘limited liability’. If a company is unable to meet its financial obligations, members are required to contribute a pre-determined amount of money toward their company’s debts. The financial liability of shareholders is the nominal value of their shares. The financial liability of guarantors is the sum agreed in their statements of guarantee.

What is a shareholders’ agreement?

The members of companies limited by shares usually draw up a shareholders’ agreement to outline their collective and individual rights and responsibilities. This is an effective way to avoid ambiguity and disagreement between members further down the line. Shareholders’ agreements usually include details about:

Prescribed particulars of rights attached to shares (voting rights, dividend rights, and capital rights).
Pre-emption rights with regards to issuing more shares or transferring existing shares.
How and when new shares can be issued.
How and when shares can be transferred from one shareholder to another.
Extent of directors’ powers.
How and when company profit is distributed.
Procedure for the appointment and removal of company officers.
Decision-making guidelines.
Rights of minority shareholders.

How to add a new shareholder or guarantor

It is incredibly easy to add shareholders or guarantors during the company formation process if you register online through Ours:

Select ‘Add New Officer’ on the application form.
Indicate whether you wish to appoint an individual person or a corporate body.
Choose the position(s) the person will have – shareholder/guarantor, director, secretary.
State the number of shares to be taken by the shareholder (if applicable).
Enter the member’s name and authentication details.
Add a contact address.

Repeat this process for every member you wish to add to your new company. When your company is registered, the details of all new members will be listed on the memorandum of association to signify their membership and limited liability. This information will also be displayed on public record.

If you wish to add a new member after incorporation, you must notify Companies House by filing a confirmation statement – you cannot use the same process as above. You can deliver a confirmation statement immediately or you can wait until the filing deadline. New shareholders will have to purchase one or more shares in the company, and guarantors will have to agree to a financial guarantee.

Details of all new members must be entered in the company’s statutory register as soon as possible. Companies House will update the public register after a confirmation statement is filed.
How to remove a company member

You can remove shareholders and guarantors from your company at any time after incorporation by completing a confirmation statement for Companies House.

In order to transfer the shares, you should complete a stock transfer form (J30), prepare meeting minutes, issue new share certificate(s) and update the register of members.
Company directors
What is a director?

Almost any individual person or corporate body can be the director of a limited company, including shareholders, guarantors and company secretaries. In fact, in most companies, directors are also shareholders or guarantors. However, a person may not be a company director if they are:

Under the age of 16
An undischarged bankrupt
A disqualified director whose term of disqualification has not yet been spent
The auditor of the company

What do directors do?

The main duties and responsibilities of limited company directors include:

Using their skills and expertise to make the company a success.
Making lawful and considered decisions only within the extent of their powers, the provisions of the articles of association, shareholders’ agreement and the Companies Act 2006.
Ensuring the company adheres to all statutory filing and reporting requirements – preparing confirmation statements, annual accounts and tax returns; paying corporation tax and VAT; managing payroll and PAYE; notifying Companies House when company details are changed; and filing copies of resolutions.
Maintaining accurate business and accounting records.
Managing the company’s finances and business bank accounts.
Appointing an accountant or auditor, if and when required.
Alerting members to financial instability or abnormalities.
Ensuring creditors are paid.
Maintaining the company’s registered office address (and SAIL address, if applicable) and making statutory records available for inspection at the appropriate location.
Avoiding conflicts of interest.

How to appoint a limited company director

To appoint a director to your company during the incorporation process, you will have to follow these simple steps:

Select ‘Add New Officer’ on online application form.
Indicate whether you are appointing a person or a corporate body.
Choose the position(s) the person will have – director, shareholder/guarantor, secretary.
Enter his or her name, DOB, occupation, nationality, and authentication details.
Provide details of the director’s residential address and service address.

To appoint a new director after company incorporation, sign into your online account, follow the same steps as above and submit the information to Companies House. The public register will be updated within approximately 24 hours. The company’s statutory register of directors must be updated immediately to reflect the new appointment.

How to remove a company director

You can easily remove a director from your company after incorporation through Our’s Client Admin Portal. Simply sign into your client account, select the relevant company officer, click ‘Edit’ and untick Director’s position and submit the information to Companies House. The termination will be updated on the public register within approximately 24 hours. The company’s statutory register of directors should also be updated to reflect the termination.

Click here to find out how to create a free client account with Ours and start managing your company online.
Company secretaries

What is a company secretary?

A company secretary is a person or corporate body appointed by directors or members to assist directors with their day-to-day duties and responsibilities. Private limited companies are not legally required to appoint a secretary unless the articles of association state otherwise.

Who can be a company secretary?

Almost any individual person or corporate body can be a company secretary, including shareholders, guarantors and directors. However, a person may not be a company secretary if they are:

Maintaining accurate business and accounting records.
Preparing and filing annual accounts, confirmation statements and tax returns.
Managing payroll and PAYE.
Maintaining the registered office address and SAIL address and making statutory records available for public inspection at the appropriate location.
Arranging board meetings and general meetings.
Taking and distributing minutes of meetings.
Monitoring the company’s financial position and accounts.
Appointing an accountant or auditor, if and when required.
Informing Companies House and/or HMRC when any business details are changed.
Filing copies of resolutions with Companies House.
Signing contracts and internal documents on behalf of the director.

How to appoint a limited company secretary

To appoint a secretary to your company during the incorporation process, follow these simple steps:

Select ‘Add New Officer’ on online application form.
Indicate whether you are appointing a person or a corporate body.
Choose the position(s) the person will have – secretary, director, shareholder/guarantor.
Enter his or her name, authentication details and contact address.

How to remove a limited company secretary

A company secretary can be removed at any time after incorporation through our online admin portal. Simply sign into your account, select the relevant officer, click ‘Edit’ and untick secretary’s position icon next to the name of the secretary you wish to remove and submit the information to Companies House.

Companies House will update the public register within approximately 24 hours to reflect the appointment or removal of the secretary. Your company’s statutory register of secretaries should also be updated accordingly.
LLP members
What is an LLP member?

LLP members are usually known as ‘partners’. They are the joint owners and managers of limited liability partnerships. Their duties will depend on what is agreed when the business is set up, and these duties and responsibilities can be changed at any time after incorporation if all members are in agreement.
Who can be an LLP member?

Almost any person or corporate body can be an LLP member, however, a person may not be an LLP member if they are:

Under the age of 16
An undischarged bankrupt
A disqualified director whose term of disqualification has not yet been spent

What do LLP members do?

LLP members are responsible for their own workload, and they receive profits in relation to how much of the business they own and control. This is usually determined by the amount of money and time they contribute to the business, the details of which will be outlined in a partnership agreement.

What are designated members?

Designated LLP members are partners who have been nominated to take on additional responsibilities on behalf of the entire partnership and its members. The types of duties they carry out are similar to the administrative responsibilities of company directors and secretaries, including:

Maintaining business and accounting records.
Filing partnership accounts and confirmation statements.
Ensuring all members complete their Self-Assessment tax returns and pay their Income Tax and NICs by the statutory deadlines.
Monitoring the LLP’s financial position and accounts.
Managing the LLP’s business bank account.
Ensuring all suppliers and service providers are paid.
Appointing an accountant or auditor, if and when required.
Reporting changes to Companies House and HMRC.
Maintaining the registered office address and SAIL address and making statutory records available for public inspection at the appropriate location.
Overseeing the dissolution of the LLP if the business is to be wound up.

At least two LLP members must be designated during the incorporation process and at all times thereafter, but it is also possible to designate all members; however, if no two members are designated, Companies House will view all members as such.

How to add a new LLP member

To appoint a new LLP member during the incorporation process, simply follow these steps:

Select ‘Add New Officer’ on online application form.
Indicate whether the member is a person or corporate body.
State whether the member will be ‘designated’.
Enter his or her name, DOB, and authentication details.
Provide details of the member’s residential address and service address.

To appoint a new LLP member after incorporation, sign into your online account (or create a new account if you are not an existing customer), follow the same steps as above and submit the information to Companies House.
How to remove an LLP member

You can remove an LLP member at any time after incorporation. Simply sign into client admin portal, select the relevant member, click ‘Edit’ and untick the position icon next to the appropriate member’s details and submit the information to Companies House.

Companies House will update the public register within approximately 24 hours to reflect the appointment or removal of the LLP member. Your LLP’s statutory register of members should also be updated accordingly.