Company formation, also referred to as company registration, is the process of recognizing a company as a corporation, meaning that it takes on its own legal status that is separate from that of the people who own the business.
The process of company formation takes place quite rapidly in the UK. The fastest incorporation to take place on record lasted only five minutes. While this is an extreme example, in most cases they are formed electronically in the same day that an application has been made. When filing for company formation through the paper method, the process can take about a month.
A company can be formed by an individual, a solicitor, specialized agents, or accountants. In some cases, company formation may be outsourced to agents that are specialized in the subject. Most of these agents will do so for less than a hundred pounds.
There are ten types of companies that are eligible for company formation. These are Industrial and Provident Societies, Companies Limited by Guarantee, Limited liability partnerships, Limited partnerships, Public Limited Companies, Private companies limited by shares, Unlimited companies, Societas Europaea, Royal Charters, and Community interest companies. The rules that govern each type of company are different, and the choices between each of these options will depend upon the purpose of the business as well as the business strategy.
To file for company formation electronically, it is necessary to use software that is compatible with the Companies House eFiling service. It is also necessary to have an account set up with Companies House. Agents who specialize in company formation have direct access to Companies House, allowing them to electronically look up the name of the company and submit it. Each of these agents has a different process for submitting a business for company formation, but all legitimate agents have been approved by Companies House through a process of integration testing.
Filing Through the Paper Method:
To file for company formation through the paper process, a business must submit three documents to the Registrar of Companies, along with a registration fee, according to the Companies Act of 2006. The first document that must be submitted is the Articles of Association. This document, which is sometimes referred to simply as “the articles,” explains what the internal rules of the company will be. The document must then be signed by the subscriber in front of a witness. As of 2006, it is now possible to submit without the Articles of Association. If this option is chosen, the business will assigned the default articles.
The second document that is submitted in the process is Form IN01. This provides the Registrar of Companies with information about the intended location of the business, which will be Northern Ireland, England and Wales, Scotland, or Wales. It will ask for information about the Secretaries and Directors as well as the subscribers. It will also ask for information about the amount of capital invested in the business through shares, if any. The form also requires a Statement of Compliance stating that all requirements of the Companies Act have been met.
The third document that must be submitted in order for company formation to take place is the Memorandum of Association. This document is simply a list of the names and signatures of all of the subscribers who want to form the company. If the company will be limited by shares, the subscribers must also state that they commit to buy at least one share each. The Companies House website provides a template for this form.