Incorporation is the process by which a new or existing business registers as a limited company. A company is a legal entity with a separate identity from those who own or run it. The vast majority of companies are limited liability companies where the liability of the members is limited by shares or by guarantee.
A business cannot operate as a limited company until it has been incorporated at Companies House under the Companies Act 2006. Establishing your business as a company means the directors are required to file certain documents every year such as annual accounts and an annual return. They must also inform Companies House about any changes, such as the appointment or resignation of directors or a change to the company's registered office.
It may be worthwhile seeking professional advice from a solicitor or accountant before deciding whether an incorporated company is the best way for you to run your business.
Who can incorporate a company?
One or more persons can form a company for any lawful purpose by subscribing their names to a memorandum of association. In law, 'person' includes individuals, companies and other bodies. By completing the memorandum the subscribers are confirming their agreement to form a company
There are four types of company:
Private company limited by shares: This company has a share capital and the liability of each member is limited to the amount, if any, unpaid on their shares. A private company cannot offer its shares for sale to the general public.
Private company limited by guarantee: This company does not have a share capital and its members are guarantors rather than shareholders. The members' liability is limited to the amount they agree to contribute to the company's assets if it is wound up.
Private unlimited company: An unlimited company may or may not have a share capital but there is no limit to the members' liability.
Public limited company: A public company has a share capital and limits the liability of each member to the amount unpaid on their shares. It may offer its shares for sale to the general public and may be quoted on the stock exchange.