Incorporating your own company If you have decided to set up either a limited liability company or a limited liability partnership, there are a few points which you need to consider.
Company nameYour company can only have a name that is not already registered by another company. In order to check whether your company name is available; a search can be made on Companies House.
Director(s)/company secretary or designated members (also referred to as officers)Since the Companies Act 2006 a private limited company can operate with a sole director, therefore, only one director is needed to incorporate a limited company. In relation to an LLP, a partnership must have at least two designated members.
You must choose the officers for your Company wisely as they are responsible for the daily running of the company. You should make sure that they are capable of fulfilling their duties and obligations to the standard that you require.
Shareholders/membersAs investors in the business, shareholders will be entitled to certain company/LLP information as well as the right to vote on certain matters in some cases. Shareholders can either be individuals, or corporate members.
Where appropriate, shareholders have the further right to receive dividends on their investments as well as a right to a return on their capital investment. Shareholders won’t have any further obligations to the company/LLP, apart from any terms of a shareholders agreement or the payment of any capital remaining unpaid that they have yet to finalise.
It is often the case that shareholders are also the directors/designated members and/or employees of the company.
Articles of associationThese apply to limited companies only. A limited company is governed by its articles of association along with the Companies Act 2006. Essentially, the articles of association are a rule book for the running of a company. All shareholders and company officers are required to comply with the provisions of the articles at all times. However, it is possible to alter the articles after incorporation if the needs of the business change.
If a company has a simple structure, hereby meaning that it has one class of shares, then it may be suitable for the company to adopt the governments standard articles of association (known as ‘model articles’). The case will differ if there is to be a different designation of shares (or different classes of shares), numerous directors with different responsibilities or if the company’s structure is more complex. In this case, a custom-built set of articles should be implemented.
Will the business have a trading address?You should decide whether the company will have a registered office or whether there will be a need to nominate a different address as its registered office.
Every company/LLP must have a registered office address at which the company/LLP can be contacted or where official post can be sent to. This address need not be the trading address of the business or an officer’s home address. In fact, many professionals (lawyers and accountants etc.) will offer their own offices as registered office address, however they will charge a fee for doing so.
Statutory RegistersEvery limited company/LLP must keep a set of statutory registers which can be made available for inspected at any time. These registers can either be held at the registered office or at a nominated single alternate inspection location (SAIL). These registers (with a couple of exceptions) are not kept at Companies House so you need to ensure you have a set on incorporation and that these are kept up to date. These requirements are set out within the Companies Act 2006 and include the need to keep a register of directors, register of director’s residential addresses, register of members and register of charges.
Is a shareholders/LLP agreement required?When a company has more than one shareholder it is sensible to have a shareholders agreement which sets out everyone’s understanding of their responsibilities and obligations so as to prevent any disagreements in the future.
In the event that the company cannot afford to have a legally binding shareholders agreement drafted, it is still important that all parties have a written and signed agreement setting out their responsibilities and obligations in order to avoid future conflicts. As soon as the company is in a position to draw up a legally binding shareholders agreement, it is strongly advised to do so.
As an LLP has no other governing constitutional documents and is bound only by the provisions of the Limited Liability Partnership Act and the relevant provisions of the Companies Act, it would be best to have a membership agreement drawn up as soon as is possible.
Once you have considered the above points, if you have any questions or would like help with the incorporation itself, please get in contact with me or anyone else within the Corporate Commercial team on 01256 320555.
Liberty RobertsCorporate & Commercial Solicitorlroberts@clarkeandson.co.uk
Please note this article and its contents are for general information purposes only and do not constitute legal advice. We recommend speaking to one of our legal professionals to gain advice in relation to a specific matter.