Understanding company formations


After sole trader, the limited company is the next most popular type of business format in the UK. To form a company you must register your new business with Companies House.

Incorporation is the process whereby your business is converted into a company that has its own legal status in law. If you need initial help or advice about whether you should incorporate, commercial solicitors can answer all of your questions.

Choosing whether to form a company

When you are considering what legal structure to operate your business under, you must ensure you understand the legal and financial ramifications of each type of structure and select the one most suitable for your business. Whatever type of structure you operate under will impact upon:

  • Tax and National Insurance payable
  • Management structures
  • Records and account keeping responsibilities
  • Raising finance
  • Your own personal financial liability

If you decide to opt for company formation, there are many steps to completing the company formation, including registering the company with Companies House. You also need to have at least one director and in some cases a secretary. It is important to understand the rights and responsibilities attached to these roles; for example, a director or board of directors make the management decisions for the company.

Choosing whether to use a company solicitor

The market is awash with services that can create your new company off-the-shelf. These services are ideal if you are, for instance, a sole trader that would like to incorporate. Many small businesses convert to limited status for tax advantages. Also, your company exists as a separate entity and thus you are not personally responsible for the company’s debts as you would be with sole-trader status.

However, company formation solicitors are useful if you have any unusual needs when forming your new company. Company formation solicitors can help you:

  • If you are unsure about the business name you want to register
  • Have other questions about the registration process
  • Interpret and understand the new rules that came into force on 1 October 2009 as a result of the Companies Act 2006

As a director of your new company you have a number of responsibilities regarding the legal standing of your business, and of course, HMRC (HM Revenue & Customs) will want to see your company accounts in the proper format. If you are in any doubt about any aspects of your new company, company formation solicitors can give you detailed advice and support.

A solicitor can be a huge advantage to have available, as they can ensure your company formation follows the prescribed company formation criteria, as laid down by company law. Contact Law can put you in touch with a company and commercial solicitor in your local area that can support you with legal advice and complete the company formation process for you.

Not sure of the alternatives available to company formation? See our guidance page on business structures.

Do you want to form a new company or convert your sole trader status to a limited company? Contact Law works with company and commercial law specialists and we can recommend the right one for you depending on the size of your company. Please call us on 0800 1777 162 or complete the web-form above.

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