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Post incorporation: Get the details right

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12th Jul 2011
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NOTE: This article has been updated as at November 2015.

So you’ve formed a new company - but what happens next? Jennifer Adams presents a checklist for ensuring that your new enterprise gets off on the right foot.
 
Once a company has been created (whichever method is used - see Company formations: What's best for you?) many directors of newly formed private limited companies make the mistake of thinking that that’s all there is to it.
 
Unlike a public limited company which needs to obtain a trading certificate, a private limited company can commence business immediately. However, certain matters do still need to be dealt with. This article lists the key points based on the assumption that the company has more than one director/shareholder and intends to become an employer. The comments to the original article can be seen at the end and stressed the importance of appointing an accountant. The text is written on the assumption that such an appointment has been considered.

Priority

  • Open a bank account - although not a strict legal necessity, in practice it is best top open a bank account in the company’s name. A decision will need to be made as to who is allowed to sign cheques and above what limit two signatures are required.There should be a board resolution to open the account and adopt any relevant banking mandate.
  • A company only exists from the date of incorporation, but the cost of forming the company should be paid personally by the intended shareholders. Once the company’s bank account is in existence and deposits have been made the directors should be repaid out of company funds; a board minute should record payment.
  • As required forms need to be submitted online or sent to Companies House, for example Form AA01 to amend the accounting reference date, if necessary, otherwise the first year will end on the last day of the month of the anniversary of the date of incorporation and subsequent accounting reference dates on the same date each year. Note: An accounting period cannot be extended to end more than 18 months from the start date of the accounting period unless the company is in administration. Form AA01 must be submitted before the filing deadline of the accounts for the period being changed. Also note whether Form NE01 is required to exempt the company from using the word ‘Limited’ as part of its name.
  • Some or all of the directors may need service contracts.
  • Consider insurance arrangements - eg directors and officers liability insurance; employees liability insurance; company car insurance and so on.
  • Apply for registration - PAYE, VAT (if it is thought that the 30 day limit will be exceeded), corporation tax; trade marks.
  • Record initial information in the statutory books, namely directors details, allotment of shares and directors’ interests (in third parties, if any). Statutory records comprise the register of members, register of directors and directors’ residential addresses, register of charges, minutes of board meetings and general meetings, accounting records, copies of directors’ service contracts.
  • All stationery used by the company must bear the company name, its place of registration, its registered number, the address of the registered office and either the names of all the directors or the names of none of them - usually none of them (s82 Companies Act 2006). If the company trades under a business name, the company name must also appear on all stationery, as must an address where documents can be served on the company (usually the address of the registered office). If the company has been allowed to dispense with the use of the word “Limited” the headed paper must state that the company is indeed limited. If a message is sent by email it is considered to be a business letter and as such the required data must appear. Supposedly such transgressions can be punishable by initial and daily fines, but the Companies House website suggests that the only fines to be levied are penalties for late filing.

Not so urgent

  • Register for VAT when the annual limit has been exceeded.
  • Monitor company and business names. Sign up online for the Companies House PROOF scheme which enables certain information (eg change of directors) to be filed electronically via use of a password. Fraudsters are therefore unable to change a company’s records and run up credit in its name (eg by filing a fictitious director’s details). Check the company’s record at Companies House frequently to make sure that it has not been targeted. The service is free.
  • Decisions taken at “board meetings” of a single or dual member should still be recorded in writing.
  • Attend a solicitor to create or amend a will to ensure that “personal representatives...have the right... to appoint a person to be a director” (Companies Act 2006 article 17) so the company can continue should the company have a sole director who dies.
  • Decide whether to adopt a company seal - legally no longer necessary in order to sign documents relying instead on the director’s signature but some companies use one to make documents look more official. Cost = approx £20.

NOTE: the comments below the article refer to the original July 2011 article.

About the author
Jennifer Adams FCIS TEP ATT (Fellow) is Associate Editor at AccountingWEB. A professional business author specialising in corporate governance and taxation, she has written for many of the leading specialist providers of legal, tax and regulatory publications. Jennifer runs her own accounting and consultancy business with offices based in Surrey and Dorset.

Replies (5)

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Euan's picture
By Euan MacLennan
12th Jul 2011 14:27

You've already made your first mistake

... by forming a company yourself, instead of asking an accountant to do it.  Do not compound your mistakes by attempting to notify Companies House of anything or to register for PAYE, corporation tax or particularly, VAT.  Do you even know what statutory books are?

Your urgent task is to appoint accountants.  Leave it to them to deal with the above matters and to advise you on the other issues.  The only thing that you need to do apart from that is to open a company bank account.

Thanks (0)
avatar
By justsotax
12th Jul 2011 15:43

whilst the checklist is useful....

i would agree with Euan....leave it to the client and inevitably something will get missed....and/or worse still they continue to treat the bank account as they did with their sole trade.....only for the accountant to have to pick up the pieces....so yes (1) seek professional advice....and this may also give rise to the question should you incorporate in the first place.....

Thanks (0)
Judi Castille senior partner of SP Consultancy LLP Kent, company formations and tax structures
By freelance32
12th Jul 2011 22:46

Incorporation

 I agree with the responses - accountant preferable.  For example I encourage the use of LLP structures along side Ltds, or even keeping sole trader running re losses whilst newco beds down and clients get used to the issues that surround running corporates.  payroll...not always a good idea in year one - P45 income, dividends in first year again to mitigate payroll tax.  

Formation - so many times the DIY method on the internet results in very scant documentation..I use a formation company in Brighton, professional and full proof - good documents - enough for all parties, HMRC and bank included, plus on line for email and minutes all done and dusted, seal and registers.

When clients first disucss with me about incorporation - it can sometimes be a 2-3hour meeting becuase it isnt as simple as just setting up a company and off you go...its not always what the client really needs and can get them into a lot of financial difficulties.

Nevertheless - all points relevant and useful prompter.

 

 

Thanks (0)
Jennifer Adams
By Jennifer Adams
13th Jul 2011 12:43

Not a Mistake

In an ideal world we would all want an accountant be appointed - preferably before the company is purchased from the previously used formation agent.

But the text was specifically written to follow on from the previous article ‘Company formations - what’s best for you?’ ie the director has already purchased/ created the company him/herself.   Under the ‘comments’ section of that article ‘matMSG’ asked for ‘a section on post Company Formation’ - so I obliged.I wanted to list the extra that needs to be done - the director of the newly formed company might not be aware even if they use an accountant (as they would do almost everything for him/her!) I agonised as to whether to make appointing an accountant a ‘priority’ but when writing the main points were to see what needed to be done should one not be appointed immediately.

Thanks (1)
Euan's picture
By Euan MacLennan
14th Jul 2011 10:17

Mmm ...

I think you would have done better to identify just two priorities (appoint an accountant and open a bank account in the company's name) and then go on to list all the matters that the accountant would need to deal with, before finally listing your other worthwhile, but not necessarily essential, points (service contracts, insurance, will, company seal, etc.).

I am also distinctly unsure about your advice for the company to reimburse the formation costs.  Your DIY OMB might think that means that the formation costs would be a tax-deductible expense against the company's profits.

Thanks (0)