What is a company formation?

Discover the essential steps of a company formation and the pros and cons of this process.

Below, you’ll find out how to register a limited company with the UK government, otherwise known as a company formation.

What is a company formation?

A company formation is the process of creating an incorporated business. It’s sometimes known as a company registration.
This takes place by submitting an application to Companies House, the government service responsible for incorporating and dissolving businesses.

How to set up a company formation

You can apply to for a company formation to Companies House online or by post. You can also do so via a third-party legal services company, although this will cost you more.

During the application, you’ll need to supply:

Once you’ve set up your limited company, you’ll receive a certificate of incorporation, which confirms your company number and the date of formation.

Documents required for a company formation

As well as completing the application form, you’ll also need to submit your Memorandum of Association and Articles of Association documents.

These essentially serve as the terms and conditions of your company, explaining how it is run, governed and owned. These have to be signed and agreed upon by all the company shareholders.

What happens if I get rejected?

If your application doesn’t meet Companies House requirements, it will be returned to you for correction. It’s recommended to always submit documents to Companies House before a filing deadline, because you won’t be given any additional time to resubmit without facing a fine.

Pros and cons

Pros

  • List your name on the Companies House register of businesses
  • You lessen your liability as a business owner by setting up a limited company
  • You may pay less tax on your business profits
  • You give yourself the option to sell shares to the public

Cons

  • There are a few fees involved with company formation

The bottom line

If you’re setting up a business as a sole trader or a partnership, you don’t need to complete an official company formation.

However, there are several advantages to doing so. You can learn more about this in our guide on setting up a limited company.

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