Forming a company: Which method is best for you?

With the internet increasing the options for forming companies, Jennifer Adams considers the pros and cons of the different methods.

At the end of March 2010 2.3m companies were registered with Companies House  - 365,000 having been incorporated during the year to that date. Companies House is trying to reduce the complexity of company formation with a new £18 web incorporation service that requires just basic information.

In his article Companies Act 2006: Formation of a company David Duvall summarised the information, documents etc needed for a company to be incorporated post Companies Act 2006 via use of form IN01. This article covers the different methods of company formation detailing the pros and cons of each.

You can form a company in one of three ways:

1. Online via the new Companies House/Business Link service
2. Use a formation agent or
3. By paper form IN01

Companies House DIY Service

• Can only be used to create a private company limited by shares that adopts standard Articles
• Cost = £18 for 2 day service; £30 - same day service;
• Registration needed with Companies House using an email address and a password.
• For each company the following information needs to be loaded:

1. Company name and registered office address. The name must not contain any words considered to be ‘sensitive’ or be the same as an existing name on the register - check this by using Companies House’ WebCHeck’ service. The address must be a physical address (i.e. not a PO Box without a physical location).
2. Details of at least one director (over 16 years of age):
   •    full name and residential address
   •    service address (can be the same as the registered office)
   •    country/state of residence
   •    nationality, occupation, date of birth and any former names
   •    ‘consent to act’ information – in place of a signature 3 items of personal information are needed from the following : Town of birth, Last 3 digits of telephone number, Last 3 digits of National Insurance number, Last 3 digits of Passport number, Mothers maiden name, Eye Colour, Fathers first name.
3. Name and address of each initial shareholder, number and class of shares, amount paid on each share, nominal value of the shares, currency, totals; any rights attached to shares (i.e. details of voting, distribution, dividend and any redemption rights)

Formation agent service
Formation companies used to create companies and then just amend the name and directors details on purchase. With the advent of computers they can undertake the same work as the DIY Companies House service; some for free and then include other ‘benefits’ for additional cost depending upon the type of service purchased. These other ‘benefits’ can include:

• Advanced name-checking using not only the Companies House service but other company data services
• Create non-standard Articles
• Identity theft protection service
• A readymade registered company with bank account, VAT registration and domain name in place
• Hard copies of documents
• A listing of formations agents recommended by members of our sister website AccountingWEB.co.uk is available here.

Paper IN01 form

• 18-page DIY form to complete for all types of company, available from Companies House website (678kb PDF download)
• Cost = £40 - 8 to10 day service; £100 - same day service
• Postal submission subject to a first come, first served process at Companies House.

About the author
Jennifer Adams FCIS TEP ATT is a freelance writer and author specialising in tax and company secretarial issues; she can be contacted at Abacus Business Solutions. The information contained in this article is intended to provide for general educational use and information only. It is not intended to advise or recommend any particular course of action or opinion. The reader should not act or rely on any information contained therein without seeking independent legal advice.