Company formations: What's best for you?

A big con I found when I used a “Formation agent service” was that they kept phoning me up to try to sell add-ons like 0800 numbers, web site hosting, accounting services etc.

(This was before Companies House had their on line service, now if only you could register for corporation tax, PAYE and VAT at the same time on the Companies House website.)

i say use a firm of accountants to do your formation.

That way they have to fob off the Agent flogging junk you don't need.

And you get someone vaguely knowledgable supervising the set up of the company, and doing the collateral tasks like CT, VAT, PAYE, bank, formats of records, letterheads, records zzzz......

The accountants have a vested interest in all this junk being right as they have to deal with the recordial fallout from it being messed up by some amateur chimping about.

And of course the accountant might give the client some good advice on whom to bank , insure, telephone, web, email with.

but what do i know.

... that the CA2006 model articles are woefully inadequate and could lead to many problems later.

So, unless you know company law, use a reputable agent (and not a fly-by-night outfit from the small ads) as their standard M&A should have plugged the gaping holes left by CA2006.

As an accountant I have a fixed fee service for the whole kit and kaboodle, and I sub-out the formation part to Stanley Davis, who I have never had a problem with. This is done online through their website and depending on extras copies of Mem & Arts, if you want a seal and register etc comes in £50 - £60 and is absorbed in my fee, which covers collating the info, MLR checks, writing up the statutory books and dealing with other basic parts such as CT41G etc and they also get help and advice on directors duties etc.

Every new company will be inundated with advertising, it is not the formation agent necessarily, but firms will monitor new registrations and target them, as you saym, usually phone or internet services. If you use an accountant and have them as registered office, these will be screened and filtered.

As registered company formation agents and fiduciaries we provide an online service to users. This allows users to select the type of entity they wish to establish, be it a company limited by shares, guarantee, a LLP, or a CIC. This provides full editing so that preferred Mem & Arts can be uploaded, and supporting information provided for sensitive names and for dispensing with the word 'Limited'.

Despite this functionality , many users wish to secure a name as quickly as possible, and often rush into a formation without getting all the ducks in a row. There is plenty of free advice to be obtained from the formation agents so it pays to give them a ring before pressing the send button. In forming many companies a day they will more than likely have already dealt with the type of structure or problem you are trying to solve and give good advice. So, think through what you need, consult with your formation agent or other professional intermediary, and make sure you get the right product for you.

Unlike many other jurisdictions, UK based company formation and fiduciary services, are not licensed, albeit they are required to be registered with HMRC under money laundering rules.  As a result there are large numbers of online providers some of whom, as earlier commentators have mentioned, will hard sell and provide frequent follow up calls. The answer is simple, put the phone down.

Great article Jennifer, although a section on post Company Formation may have been helpful too.

I work for formation agent Companies Made Simple (www.companiesmadesimple.com) and we feel the opportunity to have your company on a online admin system (which all our companies are automatically registered on) is a great benefit.

Once a company is registered with us the customer can login and carry out various admin tasks for the company such as:

Resign Directors

Appoint Directors

Resign Secretaries

Appoint Secretaries

Update Appointee information

Update the Registered Office Address

Carry out a Return of Allotment of Shares

Change the Accounting Reference Date

All fo free.

This service comes into its own if someone carries out admin for a number of Limited Companies - we also offer a free Company Secreatrial System for anyone with mutiple Companies

http://www.companiesmadesimple.com/cosec

Another "pro" overlooked for Formation Agents is the opportunity to use other services such as a Registered Office  and Service Address Services (not offerered by Companies House).

I have used the Business Link system and I think it has a place in the general mix of services available for company formations. It is a clunky interface and will invariably take longer to key in all the relevant information (as somebody else pointed out there is a lot of duplication entering addresses). That said for some who are familiar with the company registration process it shouldn't be too difficult!

I operate a company formation agency called The Company Wizard. We charge only £16.99 + vat for a limited company registration in the UK. We provide tailored packages for multiple share classes, limited by guarantee and LLP companies amongst many other things.

I do however take strongly to the Government service being able to so conveniently dodge the Money Laundering Regime. What is the point in having such a regulatory framework if it doesn't apply to one of the biggest channels. If I were a criminal I would just use the Business Link system to register all my companies...that way I can be sure I will never get questioned!

Some of the initial comments are very worrying, as well as the initial article in its portrayal of the sector. My company formation firm, like most users on this site, are professionals. I personally am a qualified accountant, company secretary and anti-money laundering, fraud and compliance specialist. Others I know, such as Jordan’s are ICAEW, others like Brighton Formations are ACCA or legal firms etc.

  As with accountancy sector, who has the continual argument concerning qualified against unqualified, there is a similar argument in our industry usually split between the lines of those who service the professional firms such as accountants and solicitors as compared to those who sell to the general public.   In fact many of us have two or even three names, each one serving a different sector. In our instance we have one site for the professionals and one for the general public, both servicing the differing needs in the unique ways. A1 and Quick Formations are two other agents amongst others also adopting this strategy.   Three important issues with Companies House, Companies House are not subject to the Money Laundering Regulations, a cost advantage over your selves and registration agents since they say they are not incorporating ‘by the way of business’, yet they are the ones selling the lists of daily incorporations to those who do the mass mailings, so please stop blaming us agents. Secondly, Companies House does not extend credit; you pay for the incorporation as you submit. Credit costs, professionals can have credit terms, general public pay up front. Thirdly, as already mentioned, there are not registers as per the requirements of the Act e.g. S113 every company must keep a register of members & S114 Register must be available for inspection. To be compliant you must have these are they will come at some additional cost (£25 average) also someone should produce the first minutes, again extra time and cost involved. Our prices usually include these items as standard. A word about Companies House web filing services for both incorporation and name changes, they cannot process sensitive word or ‘same as’ name applications. About 10% of incorporations are caught by this, some agents are already levying extra charges for these incorporations, and as yet we do not. What else does a good agent do for his professional clients? One poster has already mentioned Stanley Davis. We give credit and discounts, we, like others, give good free help and support both by phone or email, each working day, from minor issues to large corporate legal matters.  We offer a full range of services around the company from restructuring to restorations, usually these costs are half the price of the general public prices since they to some extent subsidised from the formations.    On our general public site we advertise and recommend accountancy firms as the preferred method of advice. One final mention on electronic filing, Companies House web filing does not keep a database of your clients, so if you have 5 different forms to file for different companies you have to repeatedly login and log off for each one, web filing can take up to 48 hours to hit the registers. Software used by a good agent stores you database in your log in area, log in once file as many forms for as many companies as you like. Software filing has only a 1 hour time delay. We will also send you a reminder each year for annual return filing of your clients’ companies to your email. Before agents are written off totally, remember that Companies House has stated that all documents for private companies must be filed electronically by April 2013, this will be all article amendments, restorations, all resolutions etc, everything. This will not be done by web filing but from software filing from agents and providers. This is a massive, an expensive undertaking, we have a cost for the filing of everything, our software has already been 12 months in the development stage and should be ready by the end of the year, this will be not only an incorporation system but a full secretarial system looking after all matters such as all form filing, article amendments, written resolutions, dividend payments and vouchers, it will even have online VAT applications. You can deal with all your clients’ secretarial matters from one central location.   Be careful what you wish for, cheaper formations may mean you pay a lot more for other services which are currently subsidised by any incorporation profits. We are an industry that has already hit the bottom on price, many do free and cash back incorporations paid for by banking introductions. When you are already giving something away profit has to come from somewhere. Steve O’Neill Business Tax Centre Limited

As an accountant in practice I'll add my thoughts to help rebalance this thread before it gets hi-jacked by formation agents promoting themselves!

I have used several agents who provide online formation services and would have no hesitation is recommending them - I'm not going to name them here! All the reputable agents offer a quick and efficient service.

I expect to get a company formed and the certificate of incorporation emailed to me within 24 hours. If I apply fairly early in the day I usually get it by the end of the same day, for their standard fee. They are all cheaper than the CH same day service!

Agents vary in what they offer for their minimum fee. Some expect you to download and fill in a Word template for the Articles, all you get is a pdf certificate. I prefer to use agents that supply articles completed for me - there's not much difference in price and it saves me some time. We have a Word template for stat registers and have started using an online company secretarial package, so we don't need anything else with the formation package.

We always mark up the formation fee as part of a total company setup and advisory package. If clients want to do it themselves I try to discourage them, but iof they insist I will them aware that they can do it online and offer a couple of agents' websites.

I have never received unsolicited calls or emails from formation agents trying to sell me extra services/products.

 Thank you for your comments - my original article did end with some bullet points covering what needs to be done post incorporation but we decided that over 1,000 words was too long .  We have found that readers get bored after 750 words!

But as you’ve asked I’ll have a go separately.

Please note that my article did give more ‘pro’s’ for the use of Formation Agents than the other methods of creation.

For your information the editor has asked me to write a series of articles over the next few months on ‘Company Secretarial’ related matters under the ‘Get It Right’ heading. I hope that you will find the articles interesting

About 3 years ago I set up a company online, and it was intended that certain of the initial subscribers should be able to obtain EIS relief on their investment.

To cut a long story short HMRC said we had failed to qualify because cash did not come in on the point of subscription, which of course it couldn't because we couldn't open a bank account on the day of formation. Had we used a formation agent and transferred shares it appears they would have accepted that, although the end result was no different.  Or if the funds had been deposited in a lawyer's client account they might have accepted that, but we couldn't honerstly say that was the case.

My HMRC contact privately acknowledged poor drafting in the EIS bit of Taxes Act and that it didn't envisage the concept of online company formations.

And entirely unreasonable in my view that a well intentioned process set up for simplicity by one Government Department should trip up through poor legislation drafted by another; or that any one setting up a company in that situation should need to commission expensive advice to avoid HMRC's apparent inadequacies!!

... I would add, we use IRIS and the company secretarial module stores all the company details including the CH authorisation code so I can file online from software, not via the CH website.

Why don't they tell you what you receive and how you receive it?

Formation agents seem to know that it's important enough to explain.

Hello Nigel

I have several clients that want to incorporate so could you recommend an agent that you are satisfied with which provides the full service?

Thank you

Claire

email address: clairesmith77@ntlworld.com