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.