|
UK: Company Forms |
| BACK
TO UK
INFORMATION: BUSINESS, TAXATION AND INVESTMENT |
UK
Introduction
The
UK has a number of company forms to suit business
needs, the most popular of which is the Private
Limited Liability Company (usually referred
to simply as a “limited company”).
Most types of company are required to register
with Companies House, and are subject to certain
filing requirements (such as audited annual
accounts) within prescribed periods. It is these
registration and filing requirements, and the
tax rules relating to each company form, that
may be taken into consideration when deciding
which type of company to use when carrying on
business in the UK.
BACK
TO TOP
UK Private Limited Liability Company
The
Private Limited Liability Company is the most
widely used business form in the United Kingdom.
The company name is followed by the suffix “Limited”
or “Ltd”. The company is a “legal
person” in its own right and is therefore
separate from the finances of its owners.
A
Private Limited Liability Company must have
at least one director (who may also be a shareholder),
and may have one or more shareholders. At least
one director must be an individual. A company
secretary, who usually undertakes the administrative
duties in the company, may also be appointed.
Shareholders
may be resident outside of the United Kingdom,
and may be individuals or other companies. Shares
in the company cannot, however, be offered to
the public; nor can a Private Limited Liability
Company be listed on any stock exchange. Each
shareholder is liable only to the extent of
the value of his share in the company, and is
not liable for the company’s debts unless
he has given a guarantee, such as a loan. There
is no minimum or maximum share capital requirement.
Profits
generated by the company, and in excess of profits
put aside as working capital, can be distributed
to shareholders as dividends. This is beneficial
in terms of individual income tax as, depending
on overall taxable income after allowances,
dividends earned within the basic income tax
rate threshold of GBP34,370 (GBP35,000 in 2011,
GBP37,400 in 2010 are taxed at 10%), compared
to the basic income tax rate of 20%; dividends
earned above that threshold and up to GBP150,000
are taxed at 32.5% (compared to a higher income
tax rate of 40%). Dividend income above the
GBP150,000 threshold are taxed at a rate of
42.5%.
Private
Limited Liability Companies must be registered
with Companies House. The following documents
are required in order to register:
-
Form
IN01, which contains details of where the
company is to be situated (i.e. England and
Wales, Scotland, Wales, or Northern Ireland);
the details of the directors and secretary;
details of the subscribers (i.e. those who
wish to take up shares at the time the company
is formed); and, in the case of a company
limited by shares, details of the share capital;
-
The
Memorandum of Association, which contains
the names and signatures of the subscribers,
and, in the case of a company limited by shares,
a commitment by the subscribers to take at
least one share each; and
-
The Articles of Association, which gives details
of the company’s internal management
affairs, the running of the company and its
liability.
The
standard registration fee is GBP20, and the
company is incorporated within eight to ten
working days after receipt of the registration
documents. A Same Day Incorporation service
is also available, the registration fee for
which is GBP50.
A
Private Limited Liability Company’s accounts
must be audited each year (although there are
auditing exemptions for certain small and medium-sized
companies), and accounts must be filed with
Companies House within nine months after the
end of the accounting period (or up to 21 months
where the first accounts cover a period of more
than 12 months). Failure to deliver the accounts
to Companies House within the prescribed period
will result in a penalty of up to GBP1,500.
Failure to deliver accounts may also result
in the director(s) being prosecuted in the criminal
courts.
BACK
TO TOP
UK Public Limited Liability Company
Unlike a Private Limited Liability Company,
a Public Limited Liability Company can offer
its shares to the public, and thus can raise
finance by listing on a stock exchange and selling
shares on the stock market. The company name
is followed by the suffix “plc”.
The company is a “legal person”
in its own right and is therefore separate from
the finances of its owners. At least GBP50,000
must have been issued to the public before the
company can start trade.
A
Public Limited Liability Company must have at
least two directors (who may also be shareholders),
and must have two or more shareholders. At least
one director must be an individual. A qualified
company secretary, who usually undertakes the
administrative duties in the company, must also
be appointed.
Shareholders
may be resident outside of the United Kingdom,
and may be individuals or other companies. Each
shareholder is liable only to the extent of
the value of his share in the company, and is
not liable for the company’s debts unless
he has given a guarantee, such as a loan.
Profits
generated by the company, and in excess of profits
put aside as working capital, can be distributed
to shareholders as dividends.
Public
Limited Liability Companies must be registered
with Companies House. The following documents
are required in order to register:
-
Form
IN01, which contains details of where the
company is to be situated (i.e. England and
Wales, Scotland, Wales, or Northern Ireland);
the details of the directors and secretary;
details of the subscribers (i.e. those who
wish to take up shares at the time the company
is formed); and, in the case of a company
limited by shares, details of the share capital;
-
The Memorandum of Association, which contains
the names and signatures of the subscribers,
and, in the case of a company limited by shares,
a commitment by the subscribers to take at
least one share each; and
-
The Articles of Association, which gives details
of the company’s internal management
affairs, the running of the company and its
liability.
The
standard paper registration fee is GBP40, and
the company is incorporated within eight to
ten working days after receipt of the registration
documents.
A
Same Day Incorporation service is also available,
the registration fee for which is GBP100.
A
Public Limited Liability Company’s accounts
must be audited each year, and must be filed
with Companies House within six months after
the end of the accounting period (or up to 18
months where the first accounts cover a period
of more than 12 months). Failure to deliver
the accounts to Companies House within the prescribed
period will result in a penalty of up to GBP7,500.
Failure to deliver accounts may also result
in the directors being prosecuted in the criminal
courts.
BACK
TO TOP
UK Company Limited by Guarantee
A
Company Limited by Guarantee has no share capital.
Instead, each member of the company becomes
a guarantor (rather than a shareholder) who
undertakes to contribute a nominal sum should
the company be wound up. The guaranteed sum
can be as little as GBP1 per member. The company
exists in its own right and is not owned by
its members. The Memorandum and Articles of
Association will set out the objects of the
company (i.e. what the company is set up to
do, such as to carry on a charitable organisation)
and state the amount of money to be guaranteed.
This company form is often used for non-profit
organisations (e.g. charities, clubs and associations)
that require corporate status, which can prove
useful where the organisation enters into certain
contracts, such as to purchase land or assets,
or employment/service provider contracts. Profits
are reinvested back into the company and are
not distributed to its members.
The
company members may appoint directors, often
referred to as “trustees”, to create
and implement policies. A company secretary
must be appointed.
A
Company Limited by Guarantee is not required
to suffix “Limited” or “Ltd”
to its name; it must, however, note its limited
liability on correspondence. It must be registered
with Companies House; the following documents
are required in order to register:
-
Form
IN01, which contains details of where the
company is to be situated (i.e. England and
Wales, Scotland, Wales, or Northern Ireland);
and the details of the directors and secretary;
-
The Memorandum of Association; and
-
The Articles of Association.
The
standard paper registration fee is GBP40, and
the company is incorporated within eight to
ten working days after receipt of the registration
documents. A Same Day Incorporation service
is also available, the registration fee for
which is GBP100.
Accounts
must be audited each year, and be submitted
to Companies House and, if the company is a
registered charity, to the Charity Commission.
Failure to deliver the accounts to Companies
House within the prescribed period will result
in a penalty.
UK Unlimited Company
Unlimited
Companies are rarely used. As the name suggests,
members of an Unlimited Company are fully liable
for the debt and winding-up costs of the company;
however, the company is generally exempted from
filing its annual accounts with Companies House.
If, though, the company is a subsidiary of a
limited company, or is a holding company, accounts
must be filed by that subsidiary or holding
company.
Examples
of when an Unlimited Company may be a useful
business vehicle are in cases where financial
secrecy is desired; as a service company for
a professional firm; and/or where there is minimal
risk of insolvency.
Otherwise,
to all intents and purposes, Unlimited Companies
are incorporated in much the same way as for
limited companies (see above), and must meet
the same requirements as per number of directors
and shareholders, etc.
BACK
TO TOP
UK
Partnership
A
Partnership consists of two or more people
who share the costs and liabilities of the
business. Each partner is self-employed, but
the partners together work for the benefit
of the business as a whole.
Partners
usually share in the management of and decision-making
in the Partnership; the partners have no financial
protection, however. It is possible to have
one or more “sleeping” or “dormant”
partners involved in the business, who invest
money into the Partnership for an agreed return,
but are not responsible for the day-to-day
running of the business. If a partner resigns,
becomes bankrupt or dies, the Partnership
must be dissolved, although business can continue
without that partner.
Profits
are usually shared between the partners, in
proportion to their share of the business
(i.e. if a partner owns 30% of the business,
he will receive 30% of the profits). If the
Partnership’s combined profits exceed
GBP77,000 per year, the business must be registered
for VAT.
Each
partner must keep his or her own accounts
and submit annual self-assessment returns
to HM Revenue & Customs (HMRC). Accounts
must also be kept for the Partnership itself,
and a nominated partner must submit a separate
Partnership Tax Return to HMRC annually for
the business. (Note, however, that all partners
remain liable for the Partnership Tax Return,
not just the nominated partner.)
Partnerships
do not need to be registered with Companies
House – indeed, any two or more individuals
may form a Partnership for business purposes.
It
is possible for companies to be officers in
a Partnership, in which case the company is
responsible for its own registration and reporting
requirements in relation to its investment
into, and profits earned from, the Partnership.
The company must also pay corporate income
tax on any profits it earns from the Partnership.
While
not essential, a Deed of Partnership can be
drawn up to create a legally binding agreement
between the partners, the terms of which,
for example, can avoid putting the business
at risk in the event of a dispute between
the partners, or resolving matters where,
for example, a partner dies or resigns.
BACK
TO TOP
UK
Limited Partnership
A
Limited Partnership has one or more general
partners, plus one or more partners with
limited liability (i.e. who are liable for
the debts of the entity to the extent of
the amount they have invested in the partnership).
It is distinct, however, from a Limited
Liability Partnership (see below). The Limited
Partnership must be registered with Companies
House, and all partners must sign the limited
partnership statement on Form LP5. The paper
registration fee is GBP40. A same day registration
service is also available, the fee for which
is GBP100.
Where
a limited partner withdraws any of their
investment in the partnership, or takes
part in the management of the partnership,
that partner loses the limited liability
protection and becomes liable for the debts
and obligations for that amount withdrawn
or for any amount received back from the
partnership.
A
partner, whether general or limited, may
be an individual or a company. An individual
cannot be a general and a limited partner
at the same time. Overseas limited partnerships
cannot usually register with Companies House.
There
is generally no requirement for Limited
Partnerships to file accounts with Companies
House; however, where the general partner
is a limited company (see above), normal
filing requirements apply in relation to
that partner.
BACK
TO TOP
UK
Limited Liability Partnership
A
Limited Liability Partnership shares similar
characteristics to an ordinary Partnership
(see above), except that liability is
limited to the amount each partner –
whether an individual or a company –
has invested in the partnership. All partners
therefore have some protection should
the partnership run into difficulties.
This business vehicle is particularly
suited to certain professional firms –
such as law or accounting firms –
and for joint ventures.
Registration
with Companies House is required using
Form LL IN01; the paper registration fee
is GBP40, although a same day registration
service is also available, the fee for
which is GBP100.
Limited
Liability Partnerships must have at least
two designated partners, who are given
additional responsibilities under UK law.
These include:
-
Appointing
an auditor, if required;
-
Signing accounts on behalf of the partnership
and delivering them to Companies House;
-
Informing Companies House of any changes (e.g.
of registered office, or of partners in the
firm); and
-
Preparing and signing the annual tax return.
Failure
to submit annual accounts to Companies
House within the prescribed periods will
result in a penalty under the same rules
as for limited companies (see above).
BACK
TO TOP
UK
Branch and Place of Business
An
overseas company may set up a Branch
in the UK, in order to conduct business
in the UK on behalf of the company.
The Branch remains a part of that
company – it is not a separate
legal entity.
A
Branch must be registered with Companies
House within one month of being established
in the UK. The following documents
are required:
-
Completed
Form BR1;
-
A copy of the most recent audited accounts
of the parent company; and
-
A certified copy of the company’s constitutional
documents (translated into English, if the
original is in a foreign language).
The
standard registration fee is GBP40.
A same day registration service is
also available, the fee for which
is GBP100.
Where
a Branch becomes profitable through
trade in the UK, it is required to
submit an annual tax return to HMRC,
taking account of any double taxation
agreement that may exist between the
UK and the country of residence of
the overseas company. The audited
accounts of the overseas company must
be filed annually with Companies House
within the prescribed period –
late filing will result in a penalty
(see under “Private Limited
Liability Company” and “Public
Limited Liability Company”,
above).
A
Place of Business is similar to a
Branch in that it remains a part of
the overseas company and is not a
separate entity; however, a Place
of Business, unlike a Branch, does
not have the authority to carry on
the main business of the overseas
company. Instead, a Place of Business
might, for example, provide certain
services to the overseas company,
such as IT support, warehousing or
a representative office.
The
registration, registration fees and
filing requirements of a Place of
Business are much the same as a Branch,
except the registration form to be
completed is Form 691.
If
a Place of Business has authority
to negotiate and conclude contracts
on the overseas company’s behalf,
it may be regarded as a Branch and
therefore be subject to corporation
tax in the UK.
BACK
TO TOP
UK
Specialist Companies
Property
Management Company – As the
name implies, this type of company
structure can be used to manage property.
A Property Management Company can
prove useful for certain individual
taxpayers subject to the higher 40%
and 50% tax rates, whose main business
activity is investing in and managing
property, whereby shareholders can
be paid in dividends (see under “Private
Limited Liability Company” above),
which are subject to lower tax rates.
The overall company profits are subject
to corporate income tax.
Right
to Manage Company – Under certain
conditions, leaseholders (for example,
the leasehold owners of apartments
in an apartment block, and certain
long-term tenants) can acquire and
take over the responsibility for managing
the block from the freeholder. Each
leaseholder buys a nominal share of,
say, GBP1 in the company. Registration
with Companies House is required.
Community
Interest Companies – These are
generally companies limited by shares
(see “Private Limited Liability
Company” above) or by guarantee
(see “Company Limited by Guarantee”
above). The main aim of a Community
Interest Company is, as the name suggests,
to provide benefits to the community
or to a special section of the community.
As a registered company, it can raise
funds in the same manner as a Private
Limited Liability Company or a Company
Limited by Guarantee, but is subject
to regulation by the Community Interest
Companies Regulator and by Companies
House. A Community Interest Company
cannot be a registered charity; however,
a registered charity can own a Community
Interest Company.
Franchise
– A Franchise is a business
often bought by an individual or partnership,
in that they buy a licence that gives
them the right to use the name and
services (e.g. management, marketing)
of, and sell the products of, an established
business (the franchiser) within a
specific geographical area. The most
recognisable form of Franchise is
a high street retail branch of a well-known
brand. The licence agreement sets
out how the business should be run,
and for how long – the licence
can usually be renewed so long as
the franchisee meets the requirements
and targets of the franchiser. A start-up
fee and/or a percentage of profits
are paid by the franchisee to the
franchiser.
BACK
TO TOP
|
|
| BACK
TO UK
INFORMATION: BUSINESS, TAXATION AND INVESTMENT |
|
|
Strategic Partners
Lowtax Network Portal: 'Low-tax' business and investment in the top
50 jurisdictions covered in exceptional detail.
Tax News: Global tax news, continuously updated through the day.
Investors
Offshore: The independent offshore and alternative investment guide
for expatriates and the globally aware investor.
Law & Tax News: Daily
news and background data on tax and legal developments for international business.
Offshore-e-com: A topical
guide to offshore e-commerce focused on tax and regulation.
Lowtax Library: One of
the web's largest and most authoritative business and investment information
sources.
US Tax Network: The resource
for free online US taxation information, covering: corporate tax, individual
tax, international tax, expatriates, sales and e-commerce tax, investment
tax.
Personal Business Tax
Guide: Providing essential tax news and information on business for
contractors, entrepreneurs, professionals, small businesses, artists, sportspersons
and entertainers.
Offshore
Trusts Guide: OTG publishes news, features and newsletters on the
use of offshore trust structures.
TreatyPro:
The online tax treaty resource.
|
Lowtax Library
One of the web's largest and most authoritative business and investment
information sources. Alongside topical, daily news on worldwide
tax developments, you can receive weekly newswires or
access up-to-date intelligence
reports on a range of legal, tax and investment subjects.
FREE TRIAL
NEWS SUBSCRIPTION
Our 16 constantly updated intelligence
reports cover every important aspect of 'offshore' and international
tax-planning in depth, including banking secrecy, the EU's savings tax
directive, offshore funds, e-commerce, offshore gaming and transfer
pricing. Reports are available for immediate downloading or as subscription
services with news pages.
|
Advertising
& Marketing
With over 50,000 qualified readers every month our web-sites offer
a number of cost effective, targeted advertising, sponsorship and marketing
opportunities:
- Display advertising - from 'skyscrapers' to 'buttons'
- Content/article submission and sponsorship
- Opt-in email marketing
- On-line Services Directory listings
Click
here to learn more or contact Charles Bell on +44 (0)1424 205 425
or at charles@bsi-media.com
and he will put you in touch with your regional rep.
|
News & Content
Solutions
Could your corporate web-site or newsletter benefit from incorporating
regularly updated news and content tailored to serve your clients' interests?
We can provide a variety of maintenance-free news and content solutions
that can be seamlessly integrated and dynamically delivered:
- Customised, personalised 'own-brand' news services
- Newsletter content and management
- News Headline Tickers
Click here
to learn more or contact Charles Bell on +44 (0)1424 205 425 or at charles@bsi-media.com
and he will put you in touch with your regional rep.
|
|
|
Front Page
Tax Jurisdictions
Featured Content
