Whilst in theory it is relatively simple to incorporate your company through Companies House, the reality is that there is more to it than meets the eye, with Companies often being created either with mistakes, or with a less than ideal company structure.
Whilst most mistakes can be fixed at a later date, this then requires extra filings at Companies House, which have the potential to create further issues. It is therefore usually more time and cost efficient to take professional advice on the incorporation in the first place.
Here are just some of the items that are worth considering:
Addresses
You will be asked to input two addresses for each director and each Person of Significant Control (PSC). One of these is the home address of the individual – which will not be shown on public record. The other address is a correspondence (or ‘service’) address, which will be shown on Companies House. In the absence of a company office to use, people will often use their home address as their correspondence address, meaning it then does show on public record and is visible to all.
You may instead consider using your adviser’s address. This not only helps to protect your privacy, but it means that letters from Companies House and HMRC will go straight to your adviser, which they are likely to need anyway.
Directors and Shareholders
Firstly, ensure you are comfortable with the difference between Directors and Shareholders. In short, Directors are employees that run the business, but shareholders are the owners of the business. It could also be the case the shareholders make up a holding company. Of course, in a smaller company, the Directors and Shareholders will often be the same people.
Secondly, you need to consider:
Keeping in mind that it is the shareholders who own the company and can receive
dividends from the company, these considerations are probably the biggest
concern, and are likely to be the most time consuming or costly to fix. Just to
name one example, the transfer or allotment of shares to a new individual after
the company has been incorporated can create personal tax issues for both the
receiver of the shares and the seller, even if no money is exchanged for them.
- How many shares the company will have
- The value of the shares
- Who will own the shares
- What class of shares each shareholder will own.
PSCs
As part of ongoing efforts to tackle money laundering and tax evasion, PSCs were introduced in 2016. The idea of the PSC register is simply to show who controls the company. Of course, there are very specific rules about what ‘control’ actually means, and what needs to be disclosed about who on the PSC register.
The guidance for this runs to 62 pages, although this covers all kinds of scenarios including foreign ownership and ownership by trusts.
However, even the simplest companies will often have incorrect or missing ‘nature of control’ statements.
An update to the PSC register will also need to be considered every time there is a change in shareholdings or when the details of an existing PSC change.
By seeking professional advice before incorporating your company you could alleviate problems further down the line.