Top 7 Company Formation Myths

There are many misconceptions surrounding the formation of UK companies. Registering a UK company, whether using Companies House directly or a company formation agent, need not be an onerous task. In fact, it is quite the opposite! In many cases, a company can be up and running within a day, sometimes even just a few hours. This article will dispel some of the most common company formation myths.

1) It is Expensive to Register a Company

This is quite simply untrue. Registering a company at Companies House incurs a small government fee of £12.00. If using a company formation agent this will be accounted for. You can register a company using our site to receive the additional benefit of a full set of statutory company documents for as little £28.00.

Naturally, there may be ongoing costs related to running a business. The scale of these will depend on the type of business.

2) Anyone can Register a Company

In many cases this would be true, however, this is not entirely correct. There are very few restrictions on who can be appointed as a director of a company. Nonetheless, directors must be over the age of 16 and must also not be an ‘undischarged bankrupt’ and must not be disqualified from being a company director.

3) It Takes a Long Time to Register a Company

Historically, companies were registered by submitting paper forms by post to Company Registrar. This process could often take weeks, even months if there are errors on the forms that needed to be corrected.

It is still possible to register a company this way although this is proving to be obsolete now that companies can be registered online. The application with Companies House, or with a formation agent should take no longer than 15 minutes or so. The company should then be formed within 24 hours. We offer a same day service for applications received before 2.30pm that sees companies registered in just a few hours!

4) All Personal Information will be made Public

One of the big appeals of doing business in the UK is the corporate transparency promoted by the public company register. This establishes trust in UK companies for investors, customers, employers and other businesses alike.

Nevertheless, there are certain details that need not be publically available for various security reasons. The registered office address of a company and the service address of a director or PSC is displayed on the public register. However, there is no legal requirement for this to be the home address of the individual in question. This can be the address of an accountant or a service provider like ourselves.

Click here to read more about our low-cost company formation and address service.

5) It is Better to Issue a lot of Shares

A common misconception is that the ‘real’ value of a private limited company is linked to the ‘nominal’ value of the shares issued. The confusion may be caused by the ever-changing value of publicly traded shares for public limited companies which does, in fact, reflect the perceived ‘real’ value of a company.

The number of shares in a private limited company is simply used to characterise the ownership structure. Two equal shareholders may have 1 share each with a nominal value of £1.00 to reflect their equal ownership.

The liability of a shareholder is limited to the nominal value of the shares they hold. Issuing an excessive number of shares is inadvisable as this simply exposes the shareholder to unnecessary risk.

6) A Company Secretary is Required

Incorrect. Prior to the implementation of the Companies Act 2006, companies were legally required to appoint a secretary. This is no longer the case. Whilst it is still possible to appoint a secretary, the traditional responsibilities of a company secretary will fall to the director(s) of a company if no secretary is appointed.

7) Any Company Name can be Used

There is a reasonable degree of freedom when choosing a company name. However, there are certain rules and restrictions that need to be taken into consideration. It is not possible to register a name that is too similar to an existing company name, to use a protected term or phrase without the proper permissions or to register a name that could be seen as offensive.

Myths and misconceptions aside, it’s time to get started!

Company Formation