Formation of limited companies

Concept

A limited company is a type of business structure where the company has its own legal identity.
The owners are not personally responsible for the company’s liabilities, hence the term ‘limited’.

Process

The formation process begins with picking an appropriate unique company name which is not already registered.
You then need to decide the company’s business purpose – what the company is setting up to do.
Prepare the Memorandum of Association which is a legal document that sets out the constitution of the company.
Prepare the Articles of Association which outline the running, rights and responsibilities within the company.
If a public limited company, it is mandatory to have a minimum of two shareholders and two directors. A private limited company requires at least one shareholder and one director.
It’s essential to register the company with the Companies House – the Registrar of Companies in UK. A fee is charged for this registration.
Once the process is complete, the Certificate of Incorporation is issued which signifies the company’s legal existence.

Documentation

A Statutory Register must be maintained, listing details such as shareholders and share capital.
The company also needs a registered office address which is made publicly available, and all official correspondence will be sent there.
Maintain ready-to-access Company Records which include details of directors, shareholders, company finances etc.
Ensure all necessary Returns and Reports, such as annual returns and annual reports, are filed timely with the Companies House to avoid penalties and ensure ongoing compliance.

Key Points to Remember

In a limited company, the company’s finances are separate from the personal finances of the owners.
Owners or shareholders have limited liability, i.e., they are only liable for the company’s debts up to the value of their shares.
The finances gained via shares are invested into the business.
It’s essential to stay within legal requirements and keep up-to-date with all documentation to maintain smooth operation.