Company Formation Myths
When you're forming a company, there are several misconceptions you may come across. But fear not, we've compiled this list to help dispel any myths or misconceptions you may have which are putting you off from registering your company.
1. It's expensive to register
When registering a new company through Company Wizard, you can register from just £16.95 and get extra benefits that you don't when going direct through Companies House, such as referrals to open a bank account, a free domain name, account filing reminders, and more.
There are other costs that go along with running a company and these will depend on the type of industry and the scale of your business. However, as startup costs go, £16.95 is a small drop in the ocean.
2. Anyone can register a company
This is true in most cases. However, there are some restrictions in place in regards to who can be a director. Directors must be over the age of 16, must not be an undischarged bankrupt and must not be disqualified from being a director.
3. It takes a long time to register
Before registering over the internet, the forms would have to be sent by post to the Company Registrar. This process could take weeks or months to be completed if there were errors that needed to be corrected.
These days are now gone, and companies can be registered online. The application itself takes about 15 minutes or so. The company then should be formed in under 24 hours, in fact, most applications take between 4-6 hours.
4. All personal information will be made public
An appeal for registering a company in the UK is the transparency offered by the public company register. This establishes trust in UK companies for investors, customers, employees and other businesses who want to trade with you.
Nevertheless, there are certain details that do not need to be made public for various security reasons. For example, there is no need for the home address of the director to be made public (unless it's the registered address of the company). Likewise, only part of the director's date of birth is public - part of it remains hidden.
5. You should issue a lot of shares
This is a common misconception and is brought about due to a misunderstanding which confuses them with publicly traded shares. Publicly traded shares reflect the real' value of a company, which are traded on the stock market and often linked with events such as sales performance. The higher the price of the shares, the more your company is worth. However, this isn't the case in private limited companies. There is no link between the number of shares issued and the value of the company.
In a private limited company the number of shares issued is only used to characterise the ownership structure of the company. If you're equal partners, you may be issued one share each with the nominal value of £1 to reflect the equal ownership of the company.
The liability of a shareholder is limited to the nominal value of the shares they hold. Issuing an excessive number of shares only adds to the risk that each shareholder undertakes.
6. You need to have a company secretary
This was only the case prior to 2006. With the implementation of the Companies Act 2006, you no longer need to appoint a secretary. The traditional responsibilities now fall to the director(s) if there isn't a secretary appointed.
7. Any company name can be used
There is a degree of freedom when you're choosing your company name, however, there are certain rules and restrictions that need to be taken into consideration. Also, you cannot register a name that is too similar to an existing company name or to use a protected term or phrase without the proper permission. You also cannot register a name that could be seen as offensive.
At Company Wizard, we check the name you want to ensure it complies with the requirements. We can also help if it's flagged up as a protected term or phase too.
Hopefully these myths have now been busted for you and you can see exactly how beneficial it can be to register a company.
Still have a question? Let us know!