There are numerous myths that surround company formation in the UK, the most popular of which is that setting up a company is a daunting and demanding task. The truth is that, whether you use a company formation agent or directly use the Companies House, you can have your company up and running in a matter of a few days (and sometimes, in a mere few hours). In this blog, we will be busting some other similar UK company formation myths.
Myth 1 – Setting up a company is expensive:
This is certainly untrue, as you can get your company registered at a nominal government fee as low as £12.00 (£13.00 if you use our service which includes add ons). Sure, you are going to have to endure the costs related to the day-to-day running of the company and those expenses will depend upon the type and scale of your particular business, but even those are amongst the cheapest in the world. As far as registration goes, that is a pretty inexpensive process. In fact the UK is the least expensive country in the world in which to register a company.
Myth 2 – Anyone can be a director:
Although this is true in a lot of cases, it is not entirely accurate. There are restrictions – albeit very few – on who you can appoint as the director of a company. For instance, a company director should at least be 16 years old, should not be an ‘undischarged bankrupt’, and should not be in any way disqualified from becoming a company director.
Myth 3 – Information about the directors and shareholders will have to be made public:
The emphasis on accountability laid by the public corporation registry is one of the most tempting reasons to do business within the UK, since it instills confidence within investors, employees, customers, and other stakeholders.
However, despite the high level of transparency, certain details are withheld from the public owing to a multitude of security reasons and concerns. For example, while companies are obligated to display their company address and the PSC’s or director’s service address on the public register, it need not be the residential address of the relevant individual(s) – the address of a service provider or an accountant can be shared. Our address service is the best and most competitively priced in London.
Myth 4 – There is no personal liability if you operate a limited company:
Perhaps, the biggest reason that people run a limited company is to shield themselves from any personal liability in case of company debt. However, there are certain instances when a limited company owner might be held personally liable, which include:
- No or improper following of corporate formalities.
- Certain owners exert excessive control over the company.
- Owners use personal funds to fulfil company obligations or mix personal funds with those of the company.
- Insufficient capitalisation at the time of company formation.
- Fraudulent activities.
Myth 5 – Any company name can be used:
Although there is a great degree of independence on offer while choosing a company name, there are certain rules and limitations that need to be considered. For instance, you cannot pick a name that closely resembles the name of an existent corporation, use phrases or words that are protected (unless you have obtained a special permit), or to choose a name that is potentially offensive. Our service offers a name check process which allows clients to confirm that a name is available for registration.
Myth 6 – Companies are required to have audits and secretaries:
Most companies in the UK are exempt from audits. These companies include small companies, subsidiaries satisfying certain requirements, and charities with a gross income that does not exceed £1 million.
As for company secretaries, they were a legal requirement until the Companies Act 2006 was implemented. Although companies can still appoint secretaries, the responsibilities traditionally associated with a secretary will be automatically transferred to the company director(s) if one is not appointed.
To conclude, corporate ignorance – coupled with films and TV shows – has led to a great deal of misconceptions about companies and their formation, and we hope that this blog will prove to be helpful in alleviating many of them.