Starting up: Doing it yourself vs. using a formations company

Setting up a business? Find out whether you should take the DIY approach with Companies House or get a company to act on your behalf

When you’re starting a business, there’s a lot of work to do. The question is, should you do it yourself or call in outside assistance?

Some things in a new business you can only do yourself – such as coming up with your business idea in the first place – but others are easily outsourced. The act of formally setting up your company with Companies House is one of those tasks; you can submit yourself, or you can have a formations company do it on your behalf.

The manual approach

If you have the time and a good grasp of the legal principles involved, you can submit your own application to Companies House.

If you’re creating a limited company that is to be limited by shares and adopting standard articles, and using a company name you don’t need permission for, you’ll be able to do this online through the UK government’s website. Otherwise, you’ll need to complete form IN01 and submit by post; bear in mind that the form is 18 pages long, so it can be a time-consuming task!

Before you begin, you’ll need to have the right information to hand. This includes a company name – which must be in compliance with the rules on what it can and can’t include – an address for the company, at least one director, and at least one shareholder (they can be the same person).

You’ll also need:

  • A memorandum of association which is a legal statement by all the initial shareholders agreeing to create the company
  • A statement of capital which details the company’s shares and the rights to them
  • Articles of association which are written rules about how the company is to be run

It’s advisable to use templates for these documents to ensure that they’re completed to the right standards.

Once you have all these documents prepared, you can submit them to Companies House, along with the applicable fee. If you register online, this is currently £15 and your application should be processed within 24 hours. If you submit by post, the fee is currently £40 and can take eight to 10 days, unless you choose the more expensive same-day process (£100).

One of the main disadvantages of filing for yourself is the risk of errors; if you don’t get your application right it will be rejected by Companies House. This will result in the forms being returned to you, and you’ll essentially need to begin the submission process again, which can cause lengthy delays.

Using a formations agent

Setting up a limited company through a formations agent comes with a number of advantages. Because they deal with these applications on a daily basis, they’re able to check your application before it goes to Companies House, ensuring that you don’t have to pay the fee for an application that is likely to be rejected. This doesn’t actually ensure that your application will be accepted, but it improves the chances.

Formations agencies also often offer quicker turnaround times for the process, allowing you to receive your Certificate of Incorporation in just a few hours.

In addition, if there are errors that lead to your application being rejected, you’ll be able to correct them and re-submit, which often means that a company can be incorporated the same day even if there are errors in the initial application.

Formations agents can also allow you to submit online regardless of the specifics of your application, and many offer additional services after incorporation such as reminders of key filing dates and an online system to manage your company’s records.

The choice is, of course, entirely yours; but unless your application is straightforward, many find that using a formations agent makes the process both quicker and easier.

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