Once an entrepreneur decides upon a business plan, the next decision to be taken is about the type of business that is to be started. Is it going to be a sole proprietorship, a partnership or a limited company? Broadly speaking, there are two types of limited companies in the UK.- those that are publicly traded and those that are privately owned. This discussion is especially focused on the privately owned limited company. In a sole proprietorship and in a partnership, the owner bears the entire responsibility for debts, law suits and other issues. A limited liability company on the other hand is an independent legal entity in itself and all business deals are made on the behalf of the company. Its owners are only liable for the amount that they have invested in the company.

There is a specific procedure to set up a limited company in the UK. The Companies Act generally allows one or more persons to form a company for any lawful purpose by subscribing to its memorandum of association. To start, one has to pay a fee to the registration body - Companies House. The standard registration fee is £20. One can avail the premium services for £ 80, which provides for incorporation on the same day as the documents are received. This is the cheapest way of starting the company. The other important document to be filled is the Memorandum of Association. This document sets out:

• The company’s name
• Location of the registered office of the company
• Objects of the company
• Description of what the company does

Besides these, one needs to submit Articles of Association, Form 10 and Form 12. The Articles of Association is the document that sets out the rules for running of the company’s internal affairs. One may adopt the standard articles of The Companies Act in full, known as table A or may submit an amended version while registering. Sets of forms to incorporate a company are available free of charge from Companies House. Specimens of these documents can also be obtained from legal stationers, accountants, solicitors or company formation agents. When all these documents are processed by the Companies House, it issues a certificate of incorporation and copies of memorandum and articles of association.

Once a company is incorporated, the other important step is the issuing of shares. Shares can be held by individuals or other companies. There is a limit to the number of shares that can be issued; however, there is no limit to the number of shareholders. Each shareholder receives a share certificate as a proof of ownership. Details of the number of sharers allotted and to whom must be submitted to the Registrar of Companies within 21 days. Each company must have a director and a company secretary. The director manages the business of the company, while the company secretary ensures that company rules and regulations are followed and official records are maintained. Their personal and professional details must be submitted to the Registrar of Companies. They must keep the Companies House informed of changes of director or secretary, annual returns and resolutions to change the memorandum and articles. Failure to do so may invite a heavy fine or withdrawal of registration.

Every registered company must hold an annual general meeting for the benefit of the shareholders where the director reports the company’s performance. It also provides opportunity for taking important decisions by voting. Resolutions passed in this meeting must be filed with the Companies House within 15 days. Under The Companies Act, every limited company must state its name in certain places and also on its stationery. It must also give certain information on all its business letters and order forms.

Registration of a company is a technical process. Though the staff at Companies House extends guidance on general matters, they cannot give any advice regarding the contents of memorandum and articles. In the case of uncertainty regarding any procedure, it is advisable to seek professional help. Many online companies in the UK are offering their expertise. www.uk-company-formations.net is one such website providing the most affordable, quickest and best quality online company formation solutions in the UK.