Registering a UK Company: All You Need to Know
A foreign entrepreneur who wants to set up business in the United Kingdom of Great Britain and Northern Ireland needs to choose an incorporation structure for their future company, plan their budget and prepare the necessary documents. Their profit and safety will solely depend on how successfully they will consider all the nuances and foresee the possible pitfalls. This article describes in details how to register a company in the UK.
Foreign entrepreneurs eagerly register companies in the UK. In this way, they benefit from British favourable taxation (for example, income tax is lower than the average EU rate) and stable legislation and enjoy guaranteed protection against corruption.
Shareholders are responsible for the company’s debt only up to the sum of their investment. Foreign and British shareholders have the same ownership rights. Even if you are a foreign owner, you can still employ British staff (it can be an advantage since British employees are known for their high-quality education and professional expertise).
However, if you plan to set up business in the UK, you must keep in mind that the country has several jurisdictions. For example, Isle of Man, Scotland and England will offer you different business options.
Types of British Companies
To get maximum benefits from registering a company in the UK, you must carefully choose its incorporation structure.
Here are the most common types of companies in the UK:
- Private Limited Company (Limited or LTD)
There are no restrictions on share capital, but a private limited company (LTD) requires at least one shareholder – an individual or a legal entity (place of registration is irrelevant). The company must have an appointed director (a shareholder can become one), while secretary services are not necessary. The percentage of ownership determines how much dividends you are paid on distribution. All the information about the company, its directors, shareholders and beneficiaries is public and available in the online federal register.
To remain an LTD in the UK, the company must annually submit reports on its structure and financial accounts in time. Only timely reporting companies will obtain a certificate of residence. The whole income is taxable independent of its origin. - Limited Liability Partnership (LLP)
A limited liability partnership (LLP) must have at least two partners with two people being responsible for timely and correct reporting. An LLP partner can be either an individual, or a legal entity from any country. Just as an LTD, an LLP discloses information about its directors, shareholders and beneficiaries. It can be viewed by anyone in the online federal register.
To remain an LLP, the company must annually submit reports on the its structure and financial accounts. Taxes must be paid by partners and not the partnership itself. If an LLP is not active in the UK and its partners are not UK tax residents, then tax liability exists only in the country of their tax residency. - Public Limited Company (PLC)
Registering a public limited company (PLC) is a good solution for those who plan to trade shares on a stock market. The company must have a unique name and issued value of at least £50,000. At least 25 % must be paid up to the company to start trading. There must be two or more shareholders, not less than two directors and a company secretary. The owners are only responsible for the company’s debts up to the value of the shares they have bought. PLC registration lasts from three days to two weeks.
After the financial year ends, the company has six months for audit, submitting accounts and annual declaration to the Companies House. If you set up a PLC, your company secretary must be responsible for keeping minutes of annual meetings, registering directors and shareholders and issuing share certificates. The Companies House needs to be notified of any changes in PLC directors or address. PLCs must pay corporation tax on any taxable profits. Net profit can be distributed among shareholders by way of dividends. In this case, they will pay tax on dividends.
Scottish Limited Partnership (SLP)
While registering a company in the UK, you can set up a Scottish limited partnership (SLP). An SPL requires at least one general partner responsible for company management and property operations as well as limited partners who will invest, but not manage, since they are liable up to the amount they put into the partnership. If an SLP is not active in the UK and its partners are not UK tax residents, it is not accountable to the Companies House. To set up an SLP, you need a unique name and at least one general and one limited partner. They can be either individuals or legal entities. There are no requirements for partners’ citizenship and residency. A partnership agreement is not mandatory, but recommended to set out relationship between general and limited partners. Each partner pays taxes on their income in the country of residency. There is no stamp duty on related property.
How Can I Register a Company in the UK?
To set up business in the UK, you must get a unique name for your company and prepare it for registration. You cannot register a company in the UK if its name is not unique. Provocative and discriminating references are also strictly forbidden. For example, you must avoid the words, like “Crown”, “Empire”, “Bank”, “Royal” and “National”.
Any UK company requires a British address. To make your life easier, you can apply for the agent’s service, so that they obtain a registration address for you and assist you along the registration process. After discussing your case, your agent will most certainly ask you to submit documents for KYC. Once your company is registered, the required documents will be uploaded to the public federal register. You will always be able to request an apostilled copy of any document kept there.
Opening a Bank Account in the UK
If you register a company in the UK, you may want to open a bank account in one of the British banks. However, you need to understand that the requirements set for foreign applicants are rather tough. For example, you must have an office in the UK, and one of the directors as well as the majority of shareholders must be UK residents. To learn about all the requirements and apply for an account correctly, it is better to contact a legal expert.
You should not forget that even if you cannot open an account in the UK, you can always do it in the EU or some other countries.
Why Do I Need a Secretary?
Registration does not always require a secretary, but you had better hire one, just to be on the safe side. A company secretary resides in the UK and can help in getting the necessary official papers and preparing and submitting accounts.
A secretary can also make sure that your company is not stroked off or shut down at the most inappropriate moment because you failed to comply with some administrative requirements.
What Is a Dormant Company and What Is It for?
A dormant company is a company incorporated in the Companies House, but not operating and making profit. It does not pay taxes.
A dormant company may be useful if you want to do one of the following:
- Change the structure of your business.
- Lock a unique company name for future use.
- Make a pause without closing the company – it is a helpful option for entrepreneurs who plan a long vacation, have some health issues, want to recharge or expect a baby.
An entrepreneur registering a company in the UK can make it dormant immediately after registration or any time later. Period of dormancy is not limited. You only need to submit a resolution to the Companies House in time and terminate all the transactions. A dormant company can perform financial operations of only two types:
- Duty payment while notifying the Companies House about the change in company status;
- Payment of penalty duties for delays in submitting reports to the HMRC.
Dormant companies cannot trade, make money transactions or profit (even from loans and assets). They must annually report any changes and provide documents to prove that corporate accounts remain intact.
Registering Company in the UK: Conclusion
Registering a company in the UK can win you respect and trust of your international partners and grant you benefits while working with the EU companies.
Registration process has greatly been simplified. All you need to do is choosing an incorporation structure for your company, getting a unique company name and collecting the necessary documents. Ideally, you need to hire a company secretary who will manage the risks and assist in company registration and operation. In this case, your company will be incorporated without any issues that will save you time and money.
