cfi-The Look and The Law Aug 09:The Look, The Law & The Knowledge 2009 07/09/2009 13:55 Pag
into large contracts will not usually succeed to do any of those things unless owners
(usually also the directors) give personal guarantees because there will be no
financial substance to the business. Financial substance can comprise in the case
of a trading company, assets such as stock and debtors (real ones).
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Companies must disclose information such as who the directors and shareholders
are. Company accounts and an annual return need to be sent each year to
W
Companies House.
A
L
Having a company certainly imposes a greater administrative burden than operating
as a sole trader or as a partnership, but it affords much greater protection against
THE
liability.
You must ensure that you put in place the right documentation. This includes the
constitutional documents of the company called the Memorandum and Articles of
Association. If there is more than one shareholder it would also be wise to have a
shareholders’ agreement governing each shareholder’s relationship with any other.
The steps to take
• Complete the relevant forms to incorporate the company, as listed on the
Companies House website or use a company formation service;
• Register for VAT if the Company’s turnover exceeds £68,000 in the previous 12
months;
• Prepare annual accounts and file them at Companies House; and
• Complete the Annual Return including information such as the names of
shareholders and directors and file at Companies House.
The paperwork
• Relevant Memorandum & Articles of Association; and
• Shareholders’ Agreement.
THINGS TO CONSIDER
Funding
Options for financing a new business are debt or equity or both. Debt financing is
often by way of a bank or personal loan.
As a sole trader, you would apply for a personal loan and be personally liable for it.
The same applies to a partnership.
A start-up company seeking a loan will be asked by a bank for security, by way of
a charge over the assets of the company. The bank is also likely to ask you to
personally guarantee the loan to the company. As companies grow and succeed
you can ask for a release.
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