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Company Formation Services

Useful advice, tips and business news.

June 21, 2022
September 11, 2022

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How to Register a Dormant Company

When registering a dormant company, you will want to know all the necessary requirements that's attached to it, as well as other related information.

Table of Contents

• How to register a Dormant Company

• What Is a Dormant Company?

• What are Dormant Company Filing requirements?

• Starting a New Dormant Company

• Dormant Company Checklist

• Alternatives to Registering a Dormant Company

• Sole Trader Business

• Limiting Reputational Damage

• Protect your Business by Buying a Company and Keeping it Dormant

• Preserving your Limited Company

• Closing Notes

How to Register a Dormant Company

Making your company dormant is very similar to registering any limited company to Companies House. The same required formalities that you needed when you setup your company when you started trading will be required of you again. Among what’s required in switching your company’s status from ‘active’ to ‘dormant’ involves selecting an "SIC code" for your company. A unique SIC code is given to every dormant company.

This becomes apparent when you enter an SIC code "99999" in the registration form from Companies House that you intend to keep your company dormant until you are ready to trade again. Once your company has been registered as ‘dormant’ in Companies House, your company’s registered the SIC code will be publicly available.

What Is a Dormant Company?

A dormant company is a limited company that has been incorporated and is registered with Companies House, but its owners/board of directors have decided to keep it inactive and not trade. Normally, the reason why companies choose this option is to prevent other businesses to use their legally registered name, or perhaps they only want to get a legal business name quickly, but they intend to trade at a later time.

A Dormant Company will have no "significant accounting transactions" and as such will not pay any taxes or engage in any business activity.

What are Dormant Company Filing requirements?

Companies House requires dormant companies to continue filing annual accounts and a confirmation statement every fiscal year. The dormant companies accounts will show up on the filing history of the company in Companies House, which auditors and other interested parties can access.

Starting a New Dormant Company

If you wish to start a new dormant company (a company which has been incorporated, but has never traded or has no intention to trade), then include your company legal name, as well as your preferred suffix (e.g. “Limited” or “Ltd.”) in the Companies House page dedicated to making companies dormant and hit “enter.” Don’t forget to also include the domain name, which you’ve purchased from a hosting site for your company, because you will need it once you resume trading operations.

Dormant Company Checklist:

1. Carry out a company name search.

2. Register your limited company name.

3. Inform HMRC of your intention to keep the company dormant

4. Submit dormant company accounts and confirmation statements where necessary

5. Then when you're ready – start trading

6. (Don't forget to inform HMRC when you do).

7. Start trading and engage in business activities

Once you’ve registered your company as dormant or inactive in the Companies House database, it will remain that way for only 1 year. If you want to keep your company dormant for a certain period of time until you’re ready to trade again, then you must file company dormant accounts and annual confirmation statements every year. You’ll also need to inform the HMRC that you’re putting your company in dormant mode and you do this by getting a copy of their CT41G form after you’ve informed them of your intent to make your company dormant.

Alternatives to Registering a Dormant Company

You can also go to a third party company that assist other companies in processing their businesses in order to make them dormant like Companies Made Simple, and of course, us Your Virtual Office London. You’ll get the added benefit of gaining a better credit rating and find it easier to acquire investment. People will also have a higher trust rating towards you because you’ve partnered with a trustworthy company like us.

The benefits of owning a dormant limited company are:

1. Your interests are protected – no one can use your legal business name and having the ability to take time to craft a business strategy and financing before resuming trading.

2. Preserving your limited company including all of its related legal rights, while allowing you to prepare years in advance before you resume trading.

Alternatively, you can also make your company dormant with the intent of having it hold assets such as real estate or a freehold property. However this purpose is of limited relevance to small business owners, so it will not be covered in this guide.

Sole Trader Business

Perhaps the most common reason why business owners make their companies dormant is to protect their businesses when they’re operating as a sole trader (sole proprietorship in the US, or also commonly referred to as being self-employed). Operating your business as a sole trader gives you more advantages as a small business owner than registering your business as a limited company. Overall it’s also cheaper and simpler to run your business as a sole trader, it’s the reason why there are so many SMEs (small business enterprise) and start-ups opt for this type of business than the more complicated ones.

But there is one drawback to this option also, and it’s when you failed to trademark your business name, it gives other people freedom to register your business name as their own, as you have no legal grounds to prevent them from doing so.

You may also be interested to read Who Can Be A Company Director?

Limiting Reputational Damage

Through the power of social media, any kind of news (good or bad) can go viral and reach global proportions in minutes and can damage your company’s reputation with little to no warning. It’s even worse if another company has a nearly identical business name as you have, (i.e. Domnio XL Consultancy Services vs. Domnio XL Consultancy Services LLC), then several customers had a bad experience with your competitor, but when they left reviews online it was your company was tagged, or was tagged along with the culprit. In order to protect your company’s reputation, you register it as dormant which will prevent other people from registering with your company name and avoid the problem in the first place.

Protect your Business by Buying a Company and Keeping it Dormant

It’s a common practice in the UK for business owners and a company’s board of directors to unilaterally decide to put their company in dormant mode. This business tactic is important because it helps protect their business from being exploited by potential competitors (e.g. the copycat company registering a new business under the same name, which can cause serious problems for the original company). The formations process of making your company dormant and allowing it to trade once more is the same and it is done through Companies House. Pay £12.95 to have your company registered as dormant in the Companies House database and submit company dormant accounts and annual confirmation statements yearly to keep your company in dormant mode.

Preserving your Limited Company

Another scenario where a dormant company can be beneficial to you is when your limited company has been around for a certain period of time now, but you encounter an unexpected emergency and you need to put it on hold. It could be that you need to go abroad for some important work to do that’s not connected with your business, or from which your business depends a lot on and you’ve considered the costs of keeping it running vs. making it dormant, and the second option seems more reasonable.

The problem with keeping your company running is that you are required by the UK’s Companies House to file full company accounts and pay corporate taxes year after year. You will obviously need to hire an accountant to produce and submit these accounts, which will cost a significant amount. But even more problematic is if you’ll have to hire a temporary manager to help you manage your business too! This person will also charge you an insane amount of money, especially if they know how important your business is to the area where it’s operating and to you personally.

By making your limited company dormant, you can avoid much of the cost of maintaining your company, and you won’t need to go through the administrative process of closing down your limited company.

Closing Notes

Opting to put your company on hold or making it dormant may not always be your first choice when faced with a certain obstacle in your business operations, but it is worth knowing about it when the time will come that this is the best and only option you have in protecting your limited company and its interests. Be sure to talk to your company accountant about registering your limited company as dormant in Companies House before considering doing it. You can also talk to us and get free consultations.

September 22, 2021
September 22, 2021

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Who Can Be a Company Director?

Do you want to know who can be a company director? Find out all there is to know about company directors, including their roles, responsibilities, and the importance of a director for your business.

Who Can Be a Company Director? | Your Virtual Office London

There are not many hurdles for an individual to overcome in order to become a director of a UK limited company.  The question of who can be a company director is answered below, making it clear that the position is not necessarily as unattainable as it sounds.

Although no specific qualifications are needed, a number of key roles have to be fulfilled. This is in addition to the company director’s role of fulfilling obligatory tasks, such as establishing a  business address.

Definition of a Company Director

Before recognising who can be a company director, it’s important to understand the definition of a company director.  A limited company chooses a company director to oversee its finances and its business’ daily activities. A company director is required to act with integrity and abide by the law in order to make verdicts that can help the business grow. He or she can bind the company into valid contracts with third-parties (buyers, lenders, suppliers etc) and act as trustees for a company (but not the individual stockholders).

The Business Directory defines a company director as:

“An appointed or elected member of the board of directors of a company, who with other directors, has the responsibility for determining and implementing the company’s policy. A company director does not have to be a stockholder (shareholder) or an employee of the firm, and may only hold the office of director. Directors act on the basis of resolutions made at directors’ meetings, and derive their powers from the corporate legislation and from the corporate legislation and the company’s articles of association.”

With sound judgement and experience, a company director should endeavour to make a company successful through the promotion and achievement of its company’s goals.

Who Can Be a Company Director? The Key Roles

Company directors are a unit of “board of directors”, albeit the board can delegate certain powers to a board committee or a single company director.

The key roles and responsibilities of a company director are outlined in the Companies Act 2006, the articles of association, and any service contract that may be active between a director and the company.

According to the Companies Act 2006, company directors must:  

1.      Act Within Designated Powers

A company director has to adhere to the constitution of a company and comply with the company’s policy and tasks — this can include the articles of association and wider constitutional implications, for example, shareholder/joint venture agreements.

2.      Promote the Success of the Company

A company director must exercise the values of the company and success so that the company can last for a long time and thrive. The Companies Act states that a director have to have regard to, but not be limited to:

  • The potential consequences of any decision in the future
  • The company’s interests and the interests of the employees
  • The issues concerning the company’s business relationships with suppliers, customers and others
  • The company’s perspective and association with environmental and community operations
  • The commitment of ensuring the company’s reputation for high standards of business conduct
  • The obligation to act fairly and justly between company members 

3.  Carry Out Independent Judgement

A company director must use independent judgement. They have to take on the responsibility and accountability of making independent decisions. However, the company’s constitution must always be obeyed.  

4.  Consistently Exercise Reasonable Skill, Care, and Diligence

A company director has to observe the same skill, care, and diligence as any other employee with:

  • the general knowledge, skill, and experience that may reasonably be expected of a person carrying out the same functions in relation to the company.
  • the general knowledge, skill and experience that possessed by the company director.

Note: A director’s actual understanding and skills may not be enough if more could reasonably be expected of someone in his or her position, therefore a sense of recognising and adapting to the reality of individual knowledge base is key.

5.  Avoid Conflict of Interest

 

A company director has to avoid a situation where a conflict of interest may arise.  This is particularly important when it comes to exploitation of property, information, or opportunity. A conflict of interest must be avoided even if it may be beneficial to the company.

6.  Reject Benefits from Third Parties

A company director cannot accept any form of benefits from third parties. If no conflict is likely to be deemed from the benefits, then the deal in question will not be considered to be an infringement.

7.  Declare Interests in Proposed/Existing Transactions/Arrangements with the Company

A company director has to declare the extent of any interest, transaction, or arrangement with the company (directly or indirectly) to the rest of the company directors.

No infringement will be recognised if:

 

•        A conflict of interest is not likely to occur as a result of reasonable analysis to determine such a conclusion of the transaction.

•        An interest has not been declared because a company director is unaware that they possess the interest, or that the other directors are aware of the interest.

 

Remember...

It is not the directors, but members, who own the company. However, directors and members are normally the same individuals. A limited company is also responsible for its own debts. However, directors are personally responsible for ensuring the company complies with the law.

And remember, a company can have many directors (and shareholders) during company set up and any time thereafter.

For more information about the roles of a company director and how you can set-up your own business with a virtual business address, contact our professional and experienced team, today.


August 14, 2020
May 5, 2021

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Certificate of Incorporation: How to Get a Replacement

In this article we outline how to receive a replacement certificate of incorporation, what it is, and what exactly this certificate means for your business.

After you register a company, advisably through a company formations agent who can competently manage communication with Companies House, you will receive the all-important certificate of incorporation. Depending on how you registered your company, the certificate of incorporation will either be sent via post, or online.

Before we outline how to receive a replacement certificate of incorporation, it’s important to remind ourselves what exactly is a certificate of incorporation, and what it means for your business.

Certificate of Incorporation Defined

A certificate of incorporation is a legal paper that outlines key company information. It certifies and confirms that a company exists legally and is permitted to trade. All companies registered at Companies House are issued a certificate of incorporation.

A certificate of incorporation will contain the following company information:

  • Company’s registered name
  • Company registration number (CRN) (find out about your CRN and how to locate it through a Companies House search here)
  • Company registration location (England and Wales, Scotland or Northern Ireland)
  • Incorporation date
  • Company Form (limited by shares, limited by guarantee etc.)
  • Issuing Registrar (Cardiff, Edinburgh or Belfast)
  • Legislation under which the incorporation has been formed
  • Registrar of Companies official seal (Companies House)
  • Royal Coat of Arms

Your certificate of incorporation could be requested when you initially open your business bank account, as the bank will require legal evidence of your company’s existence. Additionally, you may need to show the certificate when selling shares to investors, when you’re applying for different funding, acquiring a loan, creating an overseas business division, and/or if you are registering for overseas taxes.

Receiving a replacement certificate of incorporation for a limited company or limited liability partnership (LLP) is quite straightforward and, in most cases, completely free of charge. Here are your options.

Download a Digital Copy Via Companies House Service

Whatever method you chose to set up your company, a digital file copy of your certificate of incorporation can be downloaded online via Companies House Service. This is a rather straightforward process.

To download a copy of your certificate of incorporation through Companies House Service (formerly known as Companies House BETA), simply follow these steps:

  • Visit Companies House Service: https://beta.companieshouse.gov.uk
  • Enter your company name into the search box
  • Select your company in the search results
  • Click “Filing history”
  • Scroll to the bottom and select “View PDF” next to Incorporation (you may have to navigate to the older pages to locate this)
  • Find your certificate of incorporation on page one of the PDF

Receive a Hard Copy of Your Certificate of Incorporation

A hard copy of your certificate of incorporation can be issued by Companies House for £15.00 (or £50.00 for a same-day delivery service).

In order to receive a hard copy of your certificate of incorporation, you can get in touch with the Companies House contact centre on +44 (0)303 1234 500 and provide the following details:

When Will You Use Your Certificate of Incorporation

There may be a number of instances when you’ll have to produce your certificate of incorporation, albeit it may not be a regular requirement.

Your certificate of incorporation could be requested when you initially open your business bank account, as the bank will require legal evidence of your company’s existence. Additionally, you may need to show the certificate when selling shares to investors, when you’re applying for different funding, acquiring a loan, creating an overseas business division, and/or if you are registering for overseas taxes.

Invariably, you won’t need to provide a certificate of incorporation for evidential purposes, as details of your company name and registration number will often suffice.

Remember...

Obtaining the help of a company formation agent can significantly reduce the risk of misplacing, or being unable to retrieve, important documents such as the certificate of incorporation.

The online version of your certificate can be accessed by logging into the online account you have with your company formation agent or signing in to Companies House Web Filing. If you find it difficult to retrieve your digital certificate, simply phone or send a mail to Companies House and request a replacement. And as mentioned, you’ll need to provide your company’s name and registration number.

For more information about obtaining a certificate of incorporation, or for any related assistance with setting up a company and registering a business address, contact Your Virtual Office London, today.

November 15, 2018
May 5, 2021

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What is a Statement of Capital for my Company?

The statement of capital is the information used to show an overview of your company’s share capital and inform what amount of money is invested into a company.

The statement of capital is the information used to show an overview of your company's share capital. It also describes what share classes that you have and the amount of money invested into your company. It also explains what shareholder rights are attached to the shares that you have issued.The statement of capital was introduced through the Companies House Act 2006 and came into effect from the 1st of October 2009. Previous to this act a company had a maximum set limit of authorised share capital. The new act meant that a company could now have as many shareholders as they wanted without restriction.The requirements for your statement of capital were revised and updated in 2016. The new forms specifying the information required were issued on 30th June 2016. The statement doesn't in itself list who owns all of the shares in detail, but you may be required to submit a full list of shareholders details to Companies House for their records along with your statement of capital. This is a requirement for companies limited by shares, but if you have a company that is an LLP or is limited by guarantee, it isn't a requirement.The 2016 changes also mean that companies need to submit the total amount unpaid on the company’s shares. When shares are issued, they may be awarded without the shareholder needing to pay for them at the time of issue. It can be the case that the shares were only partly-paid shares, leaving a per cent of the shares unpaid. It is up to your company if you choose to call in all unpaid shares and partly-paid shares at a later date when your company may need a cash injection.Companies House will need to know the total of all of your unpaid shares, so it is simply a case of adding up the value of all unpaid shares and the unpaid amount of partly-paid shares to get a figure.

The information you need to provide on each share you issue:

  • Currency that the share was sold under
  • Number of shares issued in the company
  • Value of each share
  • Type of shares (Redeemable, Preference, Ordinary and Cumulative)
  • The owners of a limited company (company directors): the first shareholders (subscribers) that were needed at the time of your company formation

The statement of capital also requires the original subscribers (first shareholders) to submit the following information:

  • The address of each subscriber
  • The full name of each subscriber
  • The number of shares owned by each subscriber

The actual share capital is the value of the shares that have been allocated. So for example, if one company share is worth £1.00 and if you own 10 shares you will have a share capital of £10.00. If you set your share value at £10.00 per share and you own ten shares, then your share capital will be £100.00, and so on.

Issuing shares

You are allowed to issues as many shares in your company as you wish. There are no imposed caps on the number of shares that you can issue. While this may sound wonderful, you must remember that your shareholders will be liable to pay for any unpaid shares owned, so in most cases new companies will start off small with just a limited amount of shares, to begin with, and may choose to issue more further down the line once the company has been established and is growing successfully.

November 8, 2018
May 5, 2021

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How To Find Your Company SIC Code

When setting up a new company, your company SIC code is important to categorise and describe what your business does and how it functions different activities.

When you are looking to set up a limited company you will need to know what classification your business will fall under. There are a number of government recognised five-digit codes that are applied to the type of business that you have. These are called Standard Industrial Codes, or SIC for short.Your company SIC code is used to categorise and describe what your business does and how it functions. When setting up a new company, you will need to choose the relevant codes that best reflect your business activities. For example, if your company is involved in hairdressing or beauty therapy, then your SIC code would be 96020. If your company produces artisan chocolate confectionery, then your SIC code would be 10821.Should you want to register your limited company and leave it in a dormant state for the time being, then you can assign it a 99999 SIC code that is used for dormant companies. You would then need to change your company SIC code to something more appropriate for the nature of your business when you decide to start trading with the company.There are many people who decide to register a company under a specific name to secure and protect that name from being used by anyone else. If they are not ready to start trading as yet or are still undecided about what business to start under that name, then they can register it as a dormant company with the 99999 SIC code until they decide how to use it.You can check out the complete list of government SIC code listings and decide which SIC code most directly relates to your business operation. Make sure that you choose the most appropriate code to suit your business as your code will be used by Companies House and other official bodies such as HMRC to precisely categorise your company on the public record of companies. This means that the general public can look up your businesses and others in your sector using your SIC code category number.

Do I only need one SIC code?

If your business is pretty straightforward in what it does and can be easily defined, then you will only need to choose one single SIC code to categorise your business. For example, if you run an accounting company, a firm of solicitors, or you own a bakery or a plumbing company, then you would only need to choose one code that best describes your industry or profession.There are other forms of business that are more complex in nature and require more than one SIC code to best describe and categorise their business practices. For example, a company that both imports and exports goods, or sells contrasting products and services. In these cases, you will be allowed to select any number of SIC codes up to the maximum of four to best describe what your business does and cover all functions.As the nature of many businesses can change over the years, you will need to confirm that your SIC codes are still relevant to your business each year. This is important because a company can change it's focus and will need to target a different set of customers or clients than it did previously. Should your company still be listed under an old SIC code that no longer applies to your business, then it will make it more difficult for people to find you through searching SIC codes.

Who will need to know my SIC code?

Since June 2016, every new company formation undertaken needs to provide a relevant SIC code to Companies House on a formation. The code is used by Companies House to categorise your company under its pre-planned activities. If you fail to provide a SIC code upon registration, your application will be rejected by Companies House and you will not be able to form a company.Your company will also need to provide its SIC code or codes each year while filing your annual confirmation statement should you have any changes to report during the year. This can be quite common in the early days of a new company as it starts to grow and expand and changes are made to its structure, new shareholders or directors added, changes to the PSC register etc.

How do you change a company SIC code?

You can change your company SIC code should it no longer be relevant to your business, or you start trading a dormant company that was originally registered under the 99999 SIC code. You can amend your SIC code through your confirmation statement filing.You can do this when your confirmation statement is due for submission, usually 1-year and 14-days following incorporation, or you can choose to file an early confirmation statement at any time if your submission date is a long way off.

What if I pick the wrong SIC code?

If you feel that you selected the wrong SIC code to describe your business practices, then you are not obliged to operate under that SIC code if you believe it is incorrect. You can change your SIC code to one that is more appropriate for your line of work at any time with Companies House by submitting a confirmation statement with your amended details.

November 1, 2018
May 5, 2021

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Choosing the Right Business Structure for Your Company

In this article we will help you choose the right business structure for your company, as well as the pros and cones for each one to make a clear decision.

Many thousands of budding entrepreneurs start up new businesses each year. Many of them go on to become very successful and continue to grow from strength to strength, but one thing is true of all of them – they all had to start somewhere and the successful ones needed to have a strong foundation from which to grow.Knowing which business structure to set up for your business is crucial if you are going to establish your business and grow from a strong foundation. Here we will take a look at the different business structures that are open to you and the pros and cons of each one. Whether you were thinking of setting up as a sole trader, a partnership or a registered limited company, it is important that you make the right choice from day one of your new business.

The four main business structures

For most new start-ups there are usually four main business structures to choose from.

  • Sole trader
  • Partnership
  • Limited Liability Company
  • Limited Liability Partnership (LLP)

The four business structures listed above are the most popular choices for the majority of new business owners. However, there are other business structures available such as not-for-profit community interest companies and charity organisations, but for most of our readers, the above four choices are where we are going to focus our interest.

Sole trader business structure

One of the most common business structures to set up in the early days of a new business is going it alone as a self-employed sole trader. There are currently hundreds of thousands of sole traders registered with HMRC. If you have a fantastic business idea that you can start up all by yourself, it is easy to register online as a sole trader with HMRC to get your business off the ground.Setting up as a sole trader is quite possibly the easiest route to starting a business because you don't need a huge amount of money to invest in your business. Quite often a sole trader will be a self-employed person with some sort of skill that they can sell or hire out to others. Sole traders vary greatly, so can be anything from a creative crafter, artist or designer making and selling their own wares, or a highly knowledgeable professional working as a freelance business consultant or accountant etc. There are also thousands of sole traders working as independent hairdressers, beauty therapists, personal trainers, lifestyles gurus, photographers, writers, web designers and more.While the name 'sole-trader' implies that you are some sort of one-person setup, you can actually employ staff if your business needs an extra pair of hands. However, there are certain rules to follow around employing staff as a sole trader that you need to adhere to.If you are starting to tinker with a business idea in your spare time, then depending on how much money your side business creates will determine whether you should register your business with HMRC. You need to set up as a sole trader if any of the following apply:

  • you earned more than £1,000 from self-employment between 6 April 2017 and 5 April 2018
  • you need to prove you're self-employed, for example, to claim Tax-Free Childcare
  • you want to make voluntary Class 2 National Insurance payments to help you qualify for benefits

Once you have set yourself up as self-employed you will be registered for Self Assessment and will need to file a tax return every year to HMRC.As a sole trader, all business decisions are your own. This can be a benefit because you will not need to run your business decisions by any board members or shareholders that may not be receptive to your ideas and business decisions. You also get to keep all of the profit your business makes after tax has been deducted.

The disadvantages of being a sole trader

The one major downside of becoming a sole trader is that the law makes no clear distinction between you and your business. This means that you will be personally liable for everything that happens in your business name. Should your business fail, you will be fully responsible for paying off any outstanding debts that have been run up in your business name. This means that you will be putting your personal assets at risk, such as your home, car and personal money in your bank account.Another disadvantage to consider is that should you decide to give up your business, the business will not continue to operate in your absence. This is also the case should you decide to retire or if you die.You should also consider your tax position. As a sole trader your profits will be taxed as income, so once your earnings start increasing you will end up crossing a tax threshold that will see you paying 40% tax once you reach £41,865 and then 45% tax above £150,000.A vast majority of sole traders will eventually go on to grow their one-person business into something larger. As their business grows, the need to take on employees or a business partner (or a number of partners) will become a crucial next step in developing their business. At this point, most sole traders will look at stepping up their business and upgrade to form a limited company or a limited liability partnership.

Forming a regular partnership

A regular partnership is run in much the same way as being a sole-trader, but working with a person or people that you know well. Many partnerships are created among family member that want to work together to build a family business. This can work well in the beginning, but if you want to develop your business and go after big contracts, most larger companies that you approach will usually only look to work with incorporated partnerships (LLPs), so this is something to bear in mind.Regular partnerships are often a natural progression from a sole trader set up. This can often occur when a husband and wife or two or more siblings decide to join forces to support their family member. The great thing about setting up a partnership is knowing you have someone that you trust who has got your back. Should you be ill or have an accident that means you cannot work for a while, you will have someone to pick up the slack and keep things going in your absence.The only legal requirement of setting up a regular partnership is the same as with a sole-trader – as in each partner registers as self-employed with HMRC and will submit an individual tax return each year.As standard business partners, you will each be responsible for the debts owned by your business should it fail, just as sole-traders are. This is why it is very important that you completely trust anyone that you are planning to go into business with.

Limited Liability Partnership (LLP)

A safer route to setting up a business partnership would be to go down the Limited Liability Partnership route. You can take your partnership and incorporate it by going through the company formations process. This means that your partnership will be registered with Companies House as an official LLP, and you will benefit from all the legal protection that comes with it.Registering as an LLP will give your business great credibility in the business world, and will enable you to approach and work with larger companies that will only work with officially registered businesses.Being an LLP can also make it much easier for you to source business financing, should you need it. This can help if you have plans to expand your business and move to larger premises, take on employees or upgrade your essential company assets, such as tools and machinery.

Disadvantages of forming an LLP

By registering your partnership with Companies House, you will be letting yourself in for a lot more paperwork. You will have statutory mail coming from both HMRC and Companies House that you cannot afford to ignore or incorrectly complete. There are also harsh financial penalties attached to late submissions or errors in your submissions.In these cases, it would be wise to employ the services of an accountant that is used to handling business accounts and dealing with HMRC and Companies House.

Limited Liability Company formation

By far the most common business structure after a sole-trader is the limited liability company structure. Most limited companies are limited by shared and owned by their own directors and shareholders. You can register your company as a solo operator and be the company director as well as a company shareholder.The biggest benefit to setting up a limited company is the fact that should your business fail, the most your shareholders will have to pay out is the face value of the shares they own in your business. This means that you can protect yourself from financial risk because there is a distinct line between your own personal money and the finances of the company.Because a limited company has a separate legal identity in its own right, it will be your business that shoulders the financial liability and debt should the business fail. This means that your own personal assets such as your home, car and personal finances are all protected.

Tax considerations of an LLC

If you are looking for more favourable tax conditions for your business, then forming a limited company will also bring you tax benefits that cannot be enjoyed as a sole-trader or as a standard partnership.Registered limited companies will pay corporation tax on their business profits and you as the company director will be taxed as an employee of the company, this means that you will only pay tax on what your company pays you for your salary. Currently, corporation tax rates stand at 19% with a government commitment to lowering the rate to 17% by 2020.

The downside of forming an LLC

There are more statutory responsibilities that come with forming a limited company, these include submitting full statutory accounts and a company tax return to HMRC each year. You will also be required to make monthly or quarterly payments of employees’ income tax (PAYE) and NICs. Companies House will also require you to file your statutory accounts and confirmation statement each year.As you can see, there are more benefits to registering your company with Companies House than remaining as a sole trader. If you want to protect your personal assets, then it makes sense to reduce the risk of losing them by taking your business down the limited liability route.

October 18, 2018
May 5, 2021

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What Are Major Differences Between Director and Shareholder?

It’s important to know the differences between a director and a shareholder to know exactly what responsibilities each role takes on, in terms of a business.

The most popular choice of company formation is a company that is Limited by Shares. For this type of registered company, you will need to have a Company Director and at least one Shareholder. A Company Director can also be a Shareholder, so you can fully incorporate a new company with just one person acting as both the Director and Shareholder.How these two roles operate is of great importance to your new business, so it is handy to know exactly what responsibilities each role takes on. Here we will take a look at what each does and the differences between them.

Management and ownership roles

Technically, a shareholder owns the company, or at least part of it, depending on how many company shares they own. Each shareholder will be issued with share certificates to confirm their stake in the company.A Company Director is the person that is tasked with the duties of managing the company. This means they will be responsible for the day to day running of the company and overseeing every aspect of it, from managing staff to ensuring profitability and steering the company in the right direction.Normally, shareholders have no requirement to actually get themselves involved in the day to day running of the company, but depending on the structure of the company, they may or may not need to be present at shareholders meetings.There are many thousands of Companies Limited by Shares that have very hands-off shareholders who simply invest their money into company shares for their portfolio without actually ever visiting the business site, or meeting the company directors.You can set up and run your own limited company all by yourself and act as both company director and first shareholder. There are many thousands of solo entrepreneurs doing this right now in the UK, and they manage their businesses very well.Many of them will get help running their company by hiring virtual office services, such as our Complete Virtual Office London, to take on the bulk of the necessary admin work while they focus of managing the company and taking it forward.

Directors and Shareholders decision making

Both the company director and the shareholder are allowed to make decisions for the company. Exactly what they can decide on should be clearly outlined within the Articles of Association. The details would have been drawn up as part of the Memorandum and Articles, which is a document that spells out the terms and conditions of the company. The company may also have a Shareholders Agreement in place where the exact duties and responsibilities of shareholders are outlined.

Are there any rules and restrictions?

To form a Company Limited by Shares, you will need at least one person to act as a Company Director. You can have as many directors as you like, and you can also start your company with just one director and add more further down the line.You will also need at least one shareholder to register your company with. Again, you can start with just one shareholder or as many shareholders as you want. You can also sell more shares further down the line and take on more shareholders, or sell further company shares to existing shareholders.A shareholder doesn't necessarily have to be a human either. You can have corporate shareholders where another company may buy your company shares and own them in their company name. As a registered company is seen by the law as a single entity that is separate from its owners and directors, a company is able to purchase shares in other companies just as an individual person can.When you first register your company with Companies House, the identity of the first shareholder or shareholders will be known as Subscribers. This means that in years to come, even if the original shareholders cease to become shareholders, their names will always be on record in the details of the company formation.There are also a few important changes to businesses that you may want to learn about before you create your new company.

Limited by Guarantee Companies

While Limited by Guarantee companies don't carry any shareholders, they do have members that act like shareholders in the company. The main difference is that members will agree to contribute a specific amount of money to the company. Usually, this is as little as £1.00, but the exact amount can be agreed upon in advance of the formation.Just like Companies Limited by Shares, Limited by Guarantee companies can have as many company directors and members as they choose. Again, a company director can also be a company member.For a registered partnership (LLP), there will be a need for at least two partners to set up the company, but members can also be a real person or another company. Again, there are no limits to how many members a partnership can take on.Whether you are looking to set up a Company Limited by Shares, a Company Limited by Guarantee, or a Partnership (LLP), the directors, shareholders or members do not need to be UK residents.

Registering your Company Limited by Shares

When you form your company, you will need to submit certain director and shareholder details to Companies House so that they can register your company and add your information to the Register of Companies. Here is what you will need to submit:Directors information (for each director you are registering your company with): Full name, date of birth, nationality, occupation, country of residence, residential address and service address.For each Shareholder you register with, you will need: Full name, address, share information including share currency, share class – such as Ordinary, Preference, Redeemable, number of shares they hold, value per share, and some personal identification security ID.For a Corporate Shareholder, your registration will need: Company name, director name, and the same share information as listed above.Be aware that all company directors, shareholders and member information, including their registered addresses, will be entered into the Public Register of Companies, which is on public display and can be searched by anyone.If you are wanting to set up your company and run it from your home address, this means that your private residential address will be on public display. This means that you could open up your home to cold callers and salespeople. You can choose to protect your home address and keep it off the public record by using a business address service, such as our Directors Service Address London, to use instead.If you need any further information about how to use our business address services for your registered company, do not hesitate to contact us. We are here to help!Call us 0207 566 3939email: office@capital-office.co.uk

February 20, 2017
May 5, 2021

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What is a SIC code?

The SIC code stands for ‘Standard Industrial Code’. While SIC codes are important for your business, they’re still misunderstood by many new business owners.

For someone just starting out in business and wanting to officially register their business with Companies House, there are a few regulatory requirements that you need to apply to your business. One of these requirements is allocating an appropriate SIC code. Every registered UK company must report a SIC code. But what exactly is a SIC code and how does it apply to your business?Firstly, the term SIC code stands for 'Standard Industrial Code'. While SIC codes are important for your business, they are still quite misunderstood by many new business owners.Basically your SIC code is a way to describe and categorise what your business does. It is a system that Companies House use to provide information about the type of business you have and to give a general overview of your business activities. The classification of each company is available for anyone to view on the public record. You will need to know your SIC code for when you submit your Confirmation Statement each year.

SIC Codes Explained

Depending on what your particular business activities are, your company will fall into a certain category. Companies House keep a comprehensive list of possible types of businesses that operate in the UK which are arranged together under similar trade classifications. There are now approaching 100 different SIC code categories to choose from. Your SIC code will be the one that matches or is the closest type of business sector you operate in.Each sector or trade group has a SIC code applied to it, but more detailed classifications are allocated within each group according to their specialisation. So for example, trade group I refers to Transport, Storage and Communication businesses. Obviously this can cover a very wide variety of different businesses under this umbrella, so further individual codes are then assigned according to what they actually do.Each and every registered UK company selects one or more SIC codes that express the nature of their business from an official list of SIC codes provided by Companies House.Lets say you run a heavy haulage freight transport company. Your company would fall under category 49.4 that covers Freight transport by road and removal services. This group includes all land-based freight transport activities other than rail transport. Because your business specifically uses the road network to operate, you would then come under SIC category 49.41 Freight transport by road. This class includes all freight transport operations by road including:

  • logging haulage
  • stock haulage
  • refrigerated haulage
  • heavy haulage
  • bulk haulage, including haulage in tanker trucks including milk collection at farms
  • haulage of automobiles
  • transport of waste and waste materials, without collection or disposal
  • renting of trucks with driver
  • freight transport by man or animal-drawn vehicles

When do I need a SIC code?

SIC codes are something that as a business owner you don't necessarily think about or even have to deal with on a day to day basis. The fact that you actually need to have one is only realised when you are submitting your Confirmation Statement to Companies House when there are any changes to your SIC code(s) that need reporting. A SIC code is also needed to form a new company and to be able to allow you to successfully complete your filing process for your first annual Confirmation Statement should your business undergo any changes.

How do I discover my business's SIC code?

In order to find the correct SIC code to suit your business, you should use the Companies House official SIC code list. You will first need to find out what your actual trade description is before you can find the right SIC code category on the list. There is a condensed PDF version of the SIC code list here.The SIC Code list is divided into different trade groups, and while you can search for your code by entering your trade description, it may take a little bit of digging around to find the most relevant match to suit your business activities. This can be quite difficult to define if you work in a particularly obscure sector, so it may take a while to find the closest possible match if there isn't an exact category that fits.Some of the trade classification categories are very specific and will be quite obvious by its very description,‘Striking of coins’, for example. But other categories are a bit more vague and can cover quite a variety of different activities, 'Other food services', for example would be a category to choose if you cannot find an exact match for your food-related business activities.

Changes to the SIC Code System

The list of SIC codes is ever growing and changing because it aims to be the most comprehensive list of classifications as possible. The most recent major changes came about in January 2008, where a 2007 version of the code was introduced. This means that all 2007 codes have five digits, while the older 2003 revised codes only had four. All Annual Returns made since 1 October 2011 have required a 2007 version of the code.Whether SIC codes will go under any further changes in future is unknown, but as more diverse industry sectors evolve and develop, it is highly likely that SIC codes will undergo some more changes in years to come. In fact, since the original list was created back in 1948, there have been revisions published in 1958, 1968, 1980, 1992, 1997, 2003, and 2007.

How many SIC codes does my company need?

In most cases a business will only need one single SIC code to cover their activities. This may be one that best describes the nature of the business, especially if it involves dealing with just one product or service, such as business accounting or carpet manufacturing etc.There is an option for a company to choose up to four SIC codes should they need to, so if your particular business is quite complex in nature, or you offer varied services that cross different sectors, then a single SIC code will not be able to fully describe what your company does. In this case you can choose more than one code to cover all you bases.

Do I need a SIC code to form a new Company?

As of the 30th June 2016, all new businesses need at least one SIC code to be able to form a company. The SIC code should be chosen that best describes the planned business activities of the new company. Without at least one or more valid SIC Codes, Companies House will reject your formation request. It would save you a lot of time and hassle to plan ahead and sort out your SIC code before you go through your company formation process.

Reporting your SIC Code

If you formed your company after 30th June 2016, your SIC codes need only be included in your Confirmation Statement if they have changed during the year since formation. It can be more common than you think for a change to happen. Should your company expand, change its business sector or offer a more diverse range of services that would require different SIC codes to explain its activities, then Companies House would need to be updated with this information.You will only have to report your SIC codes in your annual Confirmation Statement each year as and when they change. There is no need to report SIC code changes immediately – you can wait until your next annual Confirmation Statement to report them.

January 19, 2017
May 5, 2021

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What are the Responsibilities of Setting Up a Limited Company?

Although setting up a limited company is a quick process, never forget that there is more to it than just registering your business name with Companies House.

Because setting up a company can be such a quick and painless process, it is easy to forget that there is more to it than just registering your business name with Companies House. Whether you do the job yourself or use a company formation service, once the business is established, there are other responsibilities that the company director has on a regular basis. Fail to comply with these and you be facing an unpleasant encounter with the business bogeyman – HMRC.

Company formation basics

When you decide to start a business, then you have different formats to choose from, depending on the nature of the business. For some, setting up as a sole trader is the ideal solution but for many businesses, being formed as a limited company is the best option. There is a process to follow to set up a company that involves both Companies House and HMRC and a series of information that is required to create the company.There are some rules about the name you can give your company to start with – Companies House website has a page that tells you all about this here and includes things like not using the word ‘royal’ or ‘queen’ as it hints at a connection with the royal family. Once you have a name that is acceptable, you need at least one director and one shareholder. All of this information is submitted to Companies House and you can do this yourself or simplify the process by using a company formation service.

Annual responsibilities

Once the company is set up and you have a Certificate to prove it, then that stage of the process is complete. But there are also a number of other responsibilities that business owners have during the course of the year. Firstly, there are the annual tasks that need to be done.Each year a Confirmation Statement needs to be filed with Companies House. This is an overview of the company including the shareholders and directors and confirms that all the information held on the business is correct. It needs to be done once a year and can be done online or on paper, though the latter is more expensive.Annual accounts are required to be filed with Companies House, although this only needs to be an abbreviated version. HMRC will require a full set of accounts including profit and loss accounts and a director’s report. These need to be filed separately as the two don’t pass papers between them. Along with this, form CT600 needs to be completed and this is usually done by the company’s accountant as it is quite a complicated form.Every company director must also complete an annual self-assessment to declare the income they have receive from any source including from the company. Any businesses that have staff are also required to report their annual employer returns, although most of this is now done through the PAYE system in real-time.

Quarterly responsibilities

Any business that earns more than the stated threshold must registered for VAT and it is important to remember that when you register, the accounts for the previous 12 months must be taken into account. Being VAT registered means you need to complete a quarterly return on your VAT which can be done online. It is due by the end of the month following the end of the quarter.While you only file one form, both HMRC and Companies House will fine you if you don’t complete this information so it is very important not to miss this.

January 9, 2017
May 5, 2021

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Top Tips to Running a Business from Your Home

Have a closer look at some top tips and sound advice about running your own business from your home - without letting it take over your whole personal life.

In the last few years there has been a massive increase in the number of people who are becoming self-employed or starting their own small business. From freelance accountants and bookkeepers to odd job people and even fashion designers, more and more people are setting up on their own and for a great number of these people, this means setting up business from your home. But how can you ensure that your business remains professional and will be successful when you share your workplace with your living place?Lets take a look at some top tips and sound advice about running your own business from home and not letting it take over your whole home life.

Starting the business

The first step to having a home business is to know what you want to do. Planning is crucial to avoid vagueness and a sense of panic when work doesn’t start to arrive when you expect it to. Therefore, creating a business plan is something you should do before you give up your current job or register yourself as self-employed. Questions you should ask yourself include:

  • What can I do?What do I enjoy doing?Is there a market for this service or product?Can I make a living from it?How will I make and store this item pending sale?

People looking at a service based business have a few less considerations than those creating a product. For example, the self-employed accountant simply needs space for computer equipment, maybe some filing room but someone making handmade crafts needs room to store both the equipment and supplies to make the products and for the finished items themselves. So you need to assess what space you need and if you can take over enough of the house to do this when planning your business.A lot of people make good use of a spare room in their home, extend into their loft space or convert a cellar or garage into a storage area. You have to make sure that these environments are safe for storage or to work from.

Creating the business

Once you have an idea, know it is viable and there is an active demand or market for it then you can move onto the next step. Whether you simply register with HMRC as self-employed as a sole trader or form a company will depend on your plans. For example, a self-employed accountant might not plan to ever take on staff and only do the work that he or she can manage on their own. But the handmade crafts business may plan to eventually have employees making the products or have staff to handle packaging and distribution. So while being a sole trader might work for the former who never plans to expand, forming a limited company might be better for the second.When you work from home, this could mean giving out your private home address to everyone you do business with and this might not be a good idea. Therefore as part of forming your company, it might be worth investing in a registered office address service. This allows you to use an address, say in London, where all of your statutory business mail is sent. This address will go on all of your official documents and will be on the public register at Companies House for anyone researching your company.Once the company is formed you need to create an online presence for it. This means a combination of a website and social media accounts, such as Facebook and LinkedIn, that are for the business and will help start to make its existence known to the world. You can hire a web designer to build your website for you if you don’t feel confident doing the job yourself. You might also want to consider having a blog for your company as this increases your online exposure, helps your search engine rankings, and can drive new customers to your business.

Growing the business

As the business grows and takes up more of your time, you may start to outsource some of the tasks to other professionals or companies that specialise in certain aspects of running a business. One good example is a call handling or mail handling service, or a complete virtual office that can answer your calls and sort through your mail. This frees up your time to deal with other matters and means you only get the calls and mail that is important to you. Mail handling services can even scan mail and send the content to you via email, reducing the time between receiving it and you handling the contents.Other tasks you may want to outsource include your accounting and the writing of the blog. Freelance accountant paired with online bookkeeping software can make the process of submitting tax returns and other official documents much easier. And if you want to continue to grow your online presence, hiring a freelance writer to create blogs posts is ideal. Some offer virtual assistant services too where they can handle your social media awareness and marketing campaigns.

Take a break from it all

One of the most important things when working from home is that you take a break from it all on a regular basis and that you try to have an established working pattern. There’s always the temptation to do another 30 minutes after dinner because you work in one of your bedrooms and it is convenient to check emails or follow up on messages - but beware, this can lead to burnout! And because your home is also your place of work, it is important to take a break and get away from it all for a while.Remember, if you set up your outsourcing correctly, the business can continue to run without you for a week or two!

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