Company formation begins with choosing a structure that suits the business, its owners and its funding plans. A private company limited by shares is commonly used where founders or investors will hold shares and the business needs a separate legal identity. The company generally owns its assets and enters contracts in its own name, while shareholders’ liability is normally limited to the amount unpaid on their shares. Other structures, such as a limited liability partnership or a company limited by guarantee, serve different purposes.
The founders should agree the proposed company name, business activities, share ownership and director appointments before incorporation. A private company must have at least one director, and at least one director must be an individual. The company also needs a registered office address, a statement of its intended activities using a SIC code, and details of people with significant control. Harper James is a UK full-service commercial law firm advising start-ups, scale-ups and established companies on the laws of England and Wales.
The incorporation application is submitted to Companies House with the company’s constitutional documents. These include the memorandum of association and the articles of association. The memorandum records the initial subscribers, while the articles set out the rules for running the company. Standard model articles are suitable for some businesses, but bespoke articles can address matters such as share transfers, director decision-making and investor rights.
The share structure should be recorded accurately from the outset. The founders should decide the number and class of shares, the issue price, voting rights and ownership percentages. If several founders are involved, a shareholders’ agreement can supplement the articles by covering matters such as reserved decisions, funding obligations, confidentiality, transfers and what happens if a founder leaves. These documents should be consistent with the agreed cap table.
After incorporation, the company receives a certificate of incorporation and a company number. The directors should then establish appropriate financial and administrative arrangements. Typical tasks include opening a business bank account, issuing share certificates, maintaining statutory registers, confirming the registered office, registering for Corporation Tax with HM Revenue & Customs, and arranging accounting records.
The company must file information with Companies House at the required times. This includes an annual confirmation statement and annual accounts, subject to the applicable filing requirements. Changes to directors, people with significant control, registered office details or share information may also require notification. Failure to keep records and filings up to date can result in penalties and other enforcement action.
Incorporation does not by itself cover the company’s operational requirements. The business should review its contracts, terms and conditions, employment arrangements, intellectual property ownership, data protection processes, insurance and any sector-specific licences or permissions. Founders should also document the transfer of business assets or intellectual property into the company where appropriate.
A practical formation checklist is therefore: agree the structure, ownership and governance; prepare and file the incorporation documents; record the share issue; complete tax and banking arrangements; establish statutory records; and review the contracts and regulatory requirements that apply to the business. The decisions made at formation provide the framework for later investment, hiring, restructuring and sale of the company.