Top five legal considerations when creating your start-up business
So, you've got a great idea, put a team together, thought about your customers and drafted a business plan, but what now? If everything is ready to go, then it's time to set up your company.
There are lots of things to think about at this exciting time, but here are a few of the main considerations for any new business:
Who are you?
Probably the most exciting (and agonising!) details of your new business is the name as this will play a big role in how you attract business. You'll need to think of something original as your name can't be the same as or even too similar to another registered company's name otherwise someone might make a complaint meaning you have to change it. It might seem obvious, but your company name also can't be offensive and some words require permission to be used.
Where can you be found?
You'll have to choose a registered address for your business so that Companies House and other important people can reach you with official communications about your company. There aren't too many restrictions - only that it must be a physical address in the same country as your company is registered - but the address will be publically available online.
Who is responsible?
Your business must have at least one director who is legally responsible for running the company. This important job includes: following the company’s rules, ensuring accounts and reports are properly prepared and paying corporation tax. Warning! Directors may be fined, prosecuted or disqualified if they don’t meet their responsibilities, so think carefully about who you appoint.
Private limited companies in the UK don't actually have to have a secretary, but sometimes it's helpful to have one to assist with some of the duties, even though they aren't legally responsible.
How is the company owned?
Shareholders are the people who own the company and get particular rights to voting and agreeing on exciting and important changes like the company name – they can even get rid of the directors! When you set up the company, you'll need to submit a 'statement of capital' which includes the total number of shares and the names of all the people who own them. You can have different types of shares with different 'particulars' depending on what rights you want people to have.
What do you do?
When registering your company you will need to choose a Standard Industrial Classification (SIC) code to describe what the business does. You can pick from a very long list that covers everything from mining to manufacturing, education to entertainment, to transport to technology so there's something for everyone!
How do you do it?
You'll need some rules about how the company is run, which are called 'articles of association' and agreed by the directors, shareholders and company secretary (if you decide to have one). But don't worry about having to draft a complex document – lots of companies use the standard model articles, which can always be amended in the future.
Formation agents vs do-it-yourself
Once you have everything you need to set up you'll need to decide whether you want to pay someone to help you with the process or if you're comfortable doing it yourself. If you've opted for standard model articles of association then you can register online for just £12. If you're old school and prefer pen and paper then you can fill out a form IN01 and post it to Companies House for a fee of £40 (or £100 if you're in a rush and need your company on the same day!). If you would like someone to guide you through the process, there are lots of professional formation agencies online, or you can ask a law firm such as Trowers & Hamlins to assist.
Congratulations! Your company is now registered and you'll receive 'certificate of incorporation’ confirming the company legally exists and giving you a unique company number.
Please contact the Trowers team for more information. We have also produced a series of fact sheets to help you, so click here to access our online resources.