How to set up and run a small business

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Aside from the sole trader route, the limited liability company is the most popular business structure in the UK.

With a limited company, the liability of company directors is ‘limited’ in that the company’s finances are separate from the personal finances of the business owner. This is not the case for those who run their business as a sole trader (self employed).

Limited company shareholders are not responsible for any debts run up by the business, although banks may ask company directors to provide loan guarantees for commercial loans or credit taken out in the company’s name.
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A dormant company is one that doesn’t trade and has no accounting transactions.

There are two main situations where owning a dormant limited company can be useful for start-ups and small business owners;
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Although the sole trader route, which is commonly referred to as being self employed, is the most popular way of running a business in the UK, there are significant advantages of operating as a limited company.
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If you form a new limited company, you should be aware of the legal requirements you have to meet as a limited company director, on behalf of the company.
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If you want to set up a company, you can form it yourself via Companies House, use a formations agent, or an accountant will typically be more than happy to take care of the incorporation process on your behalf.
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Each year, all UK registered companies are required by law to complete and submit an Annual Return to Companies House. This form provides a snapshot of relevant company information at the time of submission.
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As long as you comply with the relevant rules you can call your company whatever you like, provided that no one else is using the name already. However there are some restrictions that you need to comply with.
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Over 1.3 million businesses currently operate as private limited companies in the UK, compared to nearly 3 million sole traders, and around 450,000 partnerships.
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Incorporation is the process of creating a company structure – a new legal entity which is distinct from the individuals or shareholders who formed it.
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Board minutes are a vital part of a successful business. They ensure directors are upholding their duties and act as a reminder for decisions made during board meetings.

As well as this, they can be important to provide information to directors who were unable to attend the meeting, new directors and, if need be, aid in cases of litigation.
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A limited company can have many classes of shares. These can be ordinary shares, preference shares and redeemable shares. The articles of association usually set out the rights of these shares while allowing the directors to issue shares with such rights and restrictions as determined by ordinary resolution.
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To form a limited company in the UK, you must complete Form IN01. In this article, we look at the information Form IN01 captures, and how this information is used by Companies House.
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When you set up a limited company, you need to provide Companies House with a registered office address. This must be a real physical address, where paperwork can be delivered, and not a PO box.
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Many businesses start out as owner managed operations with one person owning all of the shares as well as being the managing director. However, as businesses grow, they often want to bring in other people as shareholders; maybe in return for an investment or possibly to a manager that they want to incentivise.
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The Memorandum of Association is one of three documents needed to incorporate a new limited company, along with Form IN01 and the Articles of Association.
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One of the great advantages of trading through a company is to take advantage of ‘limited liability’. This means that, unless you have personally guaranteed a liability – for example to a bank or landlord – then as a director you are not responsible for the company’s debts if it goes bust.
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The Companies Act 2006 enacted a wide range of reforms to the way company law is governed. It set out the duties of company directors for the first time, and has simplified some elements of company incorporation process. In this summary, we look at the key elements of the Act from a company director’s point of view.
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Unless the Articles of Association specify otherwise, a private company does not need to have a company secretary. However, the duties of a company secretary still need to be fulfilled regardless of whether someone is formally appointed. A public company, on the other hand, must have a formal company secretary appointed.
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When you form a new limited company, one of the three documents you need to submit is the Articles of Association.

The other forms you need to submit to Companies house together with the Articles of Association are; Form IN01 and the Company Memorandum of Association. You can read more about what information is provided by these forms in our dedicated article here.
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If you are considering setting up your own limited company, the prospect of ‘dealing with the authorities’ may seem daunting. In reality, the company formation process is very simple – whether you apply yourself, or use a registration agent to set up the company on your behalf.
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