Company formations debate

 

Companies House Direct and its £18 formations service have had a profound effect on the market, capturing roughly 17% of formations business. The move has provoked a price war among agents and completely changed the industry dynamics, leaving many accountants wondering whether to stick with their preferred suppliers, or to consider alternatives. In response to this shift, we've convince Jordans and Formations Direct to take part in an online debate during March to highlight the repercussions, and assess how deeply accountants should get involved with formations.

Once they've have had their say, we’re looking for AccountingWEB members to illuminate the conversation with their comments and questions. To get things rolling, we'd like to know:

  • What are the aspects of forming a company that give you the most trouble?
  • What has been the impact of the low-cost Companies House Direct service on your working life?
  • How much time and energy should accountants devote to formations?
  • What kind of agent do you prefer to work with, and what do you want from them?
  • To what extent can company formation act as a vehicle for adding value to the client relationship?

With your help, we plan to come up with some concrete conclusions and a more comprehensive guide to the mechanics of company formation. Feel free to continue the discussion below and do join in once the ball gets rolling next week. I'll make sure that the points raised here get a wider airing. Thanks for your help!

 

Comments

What has been the impact of the low-cost Companies House Direct

ver1tate | | Permalink

This cheap service has led to a proliferation of one man limited companies being formed on the advice of the 'man in the pub' who knows everything and tells them that if the company goes bankrupt, they can just walk away from it. No mention of the personal guarantees they will have to give to get a bank loan, business credit and other essentials, plus the penalties they may be liable to for non or incorrect filing.

Price war among the agents

peterdell | | Permalink

Price war among the agents was happening before the cheap service on offer. Agents like Companies Made Simple and Complete formations typically offer for below £40. As you can generally get cash back from the bank for the client on the formation, many don't cost the client anything.

The question should be whether the government wants company formation to be so simple.

Often you now find companies are formed by individuals who don't appreciate that the annual cost of maintaining a small trading company is around £1k. They pay £30 to set the thing up and then struggle to find the annual fee. Most of these people should be sole traders. Having an opening cost of around £250 would probably make most people think twice about opening a company and seek advice first. I have at least five clients where the company was opened with no upfront advice and a Ltd company is simply not appropriate, but as they are as cheap as chips why would someone with no business knowledge not think that a company is a better option.

 

 

 

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Group: The company secretary
A space for practitioners to contribute and ask questions relating to company secretaries, particularly with reference to the new Companies Act 2006.