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Forming a limited company is a regular occurrence in the UK. According to Companies House, over 4 million limited companies are registered in the country, with 500,000 registered annually. In many ways, limited companies run the UK economy and this structure is the most popular way companies run that requires formalities.
Currently, there is no register in the UK tracking the number of sole traders and partnerships in the UK. After all, setting them up requires no formalities as they are unincorporated businesses.
In this blog post, I will focus on the process of incorporating a limited company in England and Wales, predominantly the first step: setting up and choosing an appropriate company name.
Looking to cut to the chase? If you’re looking for a solicitor to advise on forming a limited company, just call us on 0203 007 5500, or submit a contact form.
Forming a limited company – starting off.
In England and Wales, the person forming a limited company is known as the applicant. They need to file (electronically or on paper) certain documents with Companies House. These include:
- Form IN01. This form contains essential information about the company, such as its name, registered address, details of directors and shareholders, and share capital.
- Memorandum of association. This document outlines the company’s constitution and objectives.
- Articles of association. These govern the internal regulations and management of the company
Solicitors and accountants may have the requisite software to make the application. Alternatively, they may just apply by post or online as an individual might if they were processing their own.
Once you apply, this application is sent to The Registrar of Companies. This is a department at Companies House that checks incorporation applications internally.
If the person reviewing the application is happy that it’s eligible, they will incorporate the company and issue a certificate of incorporation to the applicant. Once they issue the certificate, the company now exists as a corporate entity.
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Key things to consider when forming a limited company.
When forming a limited company, The Companies Act 2006 outlines the information that the applicant needs to submit to Companies House. It also requires the applicant to make certain decisions when completing the forms, such as:
Company name.
When forming a limited company, the applicant needs to put the company name on the IN01 form. Some restrictions are worth knowing about when deciding the company name.
- Most names of Companies House must end in either ‘Limited’ or ‘Ltd’ so third parties know it is a limited company.
You cannot choose the same name as an existing company, so you need to check availability to ensure the name is not already used. The government website has a page that allows you to check company name availability.
- For the sake of consistency, Companies House will deem interchangeable terms as identical. For example, ‘£’ is the same as ‘pound’ and ‘for’ or ‘four’ are the same as ‘4’.
Some names are prohibited or require permission. The rules are that:
- It cannot be offensive in the Secretary of State for Business, Energy and Industrial Strategy’s opinion. For example, using swear words or associated names of extremist/terrorist groups.
- It cannot suggest a connection with a government department or authority. For example, ‘His Majesties Cleaning Service Ltd’ may not be allowed.
- Geographical locations can be an issue. For example, using ‘British’ can be misleading in certain contexts.
- Regulated professions have markers that need approval, such as doctors or solicitors.
- It cannot be longer than 160 characters, including spaces.
It is worth remembering that you can trade using a different name from your registered name. These are often referred to as the trading or business name. Unlike company names, you do not need to register these names with Companies House.
Infringement and passing off.
When forming a limited company, it’s important to ensure that your name is distinctly different from other companies. If your company’s name or trading name is too similar to another’s trademark, then they can make a complaint and seek legal routes to have it changed. It is a good idea to undertake a trademark search before deciding on a company name.
Even if companies do not have a registered trademark, legal action can be brought in tort law, known as passing off. In these cases, the claimant alleges that another company is suggesting an association between the companies and is unfairly benefiting from their good reputation.
The recent case of Lidl v Tesco was a relevant example of passing off, as Lidl argued that Tesco’s Clubcard logo was passing off as their own.
How can we help?
Forming a limited company in the UK is a structured process that requires careful planning. Because of this, selecting something as simple as the company name can have complexities to it.
Adhering to the guidelines set by Companies House and conducting thorough enquiries at an early stage can ensure a smooth incorporation process where the risk of potential issues later down the line can be reduced. Seeking professional advice from solicitors experienced in company formation can further facilitate the process and provide valuable guidance.
If you need help forming a limited company, contact our expert trust team by calling 0203 007 5500 or sending an email to [email protected]
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