Company Formation: Top 5 Things To Avoid When Setting Up A Limited Company
1)Avoid choosing a company name that is likely to be rejected or will have to be changed later.
There are rules when picking a name for your new limited company. Certain words are deemed to be sensitive and where a company wishes to use such a word in their company name, they may need to provide supporting documentation. Otherwise the application may be rejected.
You can check the list of sensitive words on the Companies House website or your formation agent should be able to highlight the restrictions for you.
2)Avoid making mistakes with addresses.
When registering your limited company you will be asked to provide a number of addresses, including the registered office address of the company and for each director, their usual residential address and a service address.
You should be extra careful to ensure these are correct as it can be costly to get this corrected. Many companies choose their accountant or formation agent as their registered office so you will need to make sure this is also correct.
3)Avoid purchasing an off the shelf company.
An Off the Shelf company used to be a very useful option to take when wanting to start a company quickly, mainly before the age of internet filing. Since company formation agents can now fill in the application for you online they can often have the company formed for you within 24 hours. This means that the main benefit of off the shelf companies no longer exists. Importantly, by forming your own new limited company you also avoid the risk of buying a company from people you dont know, as you will be responsible for the past history of the company.
4)Avoid starting out without a business plan or a Chartered Accountant for support.
A business plan will help you to plan out the progress of your business, the resources you will need and any potential areas of difficulty. After you have formed your company it will be much easier to see where your business is heading and what needs to be changed within it if you already have a business plan in place.
An experienced Chartered Accountant can also be very helpful when starting up. They will be able to advise you about whether you need to register for VAT or PAYE and can help you with forms sent by Companies House and HM Revenue & Customs. Most importantly they will be able to help you prepare your annual accounts and ensure that they are filed on time.
5)Avoid forming your company in a rush.
It may seem obvious, but there are many important decisions to make when forming a limited company and they shouldnt be made lightly. You should always ensure that you take your time, both when deciding whether setting up a company is right for you as well as when actually completing the application process.
In addition, company directors and the company secretary will have legal responsibilities and individuals should be aware of these responsibilities before agreeing to take on these roles.
by: TJ HICKS
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