This 'At a glance' freeview guide is essential reading for anyone thinking about starting up a new company.
- If you are starting a new business and you want to consider other types of trading vehicle, check out New business? Start here.
Setting up the company
You have decided to trade via a company: what now?
1. You need to either incorporate a new company or buy a ready-formed company 'off the shelf' (from a company formation agent).
You will need to issue shares to yourself and to any other investors or family members. Key points to consider:
- When to issue shares?
- If you are incorporating a new company you can subscribe for shares on incorporation and you may not need to consider issuing any further ones.
- If you issue shares once the company has started trading there may be potential tax consequences for you and the new shareholders.
- What class of shares to issue: what are different share classes used for?
- What are the potential tax consequences of giving shares to your family?
- What tax reliefs are available for you and your investors as a start-up?
- Whether to have a shareholder agreement.
Note: A company may be limited by shares or by guarantee: we are only considering companies limited by shares here, as companies that are limited by guarantee are generally only suitable for the voluntary sector and other specialist uses.
| Article & Link | What you get |
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How to form (incorporate) a private limited company and the points you need to consider. |
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How to issue new shares in a company together with a summary of some of the pitfalls if an issue fails to qualify for tax purposes. |
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You need to create usable share classes: setting up the wrong kind of share class could prevent you from qualifying for valuable tax reliefs. |
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A template for creating share certificates. |
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This guide examines the tax consequences of creating new share classes in a family company to split income with a spouse or close family members. |
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You are bringing in shareholders and investors, what reliefs may be open to them and who qualifies:
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Still unsure which investor relief works best? Here is a comparison.
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2. Appointing directors and making agreements with your shareholders
- A company is run by its director(s). A sole director may also be a company secretary.
- A company must issue its directors with service contracts.
- If you have different shareholders, it is advised to have a shareholder agreement.
| Shareholder's Agreement | A basic template listing some of the key points that shareholders may wish to agree on. |
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Template of key points Top tips on creating a written service contract as required by the Companies Act 2006. |
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| New director registration forms | To register with Companies House and with HMRC. |
| Employment status & tax: Directors & non-executive directors | What is the tax status of a director? How are non-executive directors taxed? A director is an office-holder. Office-holders may often be treated differently by employment law compared to tax law. This can catch out many office-holders. |
| Directors & NMW | An office-holder such as a company director or secretary is not an employee for the purposes of the NLW/NMW unless they are engaged under the terms of an employment contract. |
3. Tax compliance
Once the company is incorporated, the company needs to be registered for tax.
- Corporation Tax registration can be completed immediately after incorporation via the Companies House website, otherwise you will need to register separately.
- You will also need to register for each different taxes, depending on your activities:
- VAT: if your turnover is taxable and you are going to exceed the VAT registration threshold.
- PAYE: if you employ and pay any staff or workers.
| New companies: Tax registration checklist | The company is now set up. What registrations are needed? With whom and for what? |
| Companies: trading, non-trading and accounting periods | This guide will explain when the company is treated as having started to trade for tax purposes. When will the accounting period run to? What filing responsibilities do I have? |
| Company tax references and details | This is a practical record of the various tax references (& others) and accompanying details that you will need for compliance purposes once your company has been set up. |
| Compliance review: Returns, filing & payments | This handy guide details the various returns that a company may be required to submit depending on the nature of the business. Included are the filing deadlines and penalties for non-compliance. |
| Corporate Anti-Tax Evasion Policy Template | S.44 - s.52 of the Criminal Finances Act 2017 lays out the corporate criminal offences of facilitating tax evasion. As part of the qualifying defence to such a charge, HMRC expects all corporate entities to have an Anti-Tax Evasion policy in place. |
4. Expanding the company: motivating and retaining directors & employees
- Creating a company share scheme is one way of motivating your workforce: the process requires some thought and is worth exploring in detail in our Employee benefits & expenses section.
| Employee Shares: setting up share classes with different rights for directors and employees | Companies often create special classes of shares to attract and reward directors and employees: this guide covers the key basics. |
| Employee share schemes | Start here if you are thinking of issuing shares or share options to any new, existing or potential directors/employees. |
| Enterprise Management Incentives (EMI) | EMI is a tax-incentivised share option scheme: it may be a simpler and more cost-efficient alternative to directly issuing shares to directors and employees. |
| Employee benefits & expenses | This links to our benefits & expenses section where you can see a range of taxable and tax-free benefits & expenses. |
5. Running the business
This section contains guides on key topics that affect the day-to-day running and tax treatment of companies:
| Running the business | Practical tax & business guides on a range of key topics for companies. |
| Dividends: Index | Guides that show you how to vote and pay dividends to shareholders |
6. Expanding the company and reorganising the business or its shares
Sometimes you need to reorganise or separate a company's activities and different subsidiaries using a variety of different methods.
- What is a company reorganisation or reconstruction? When do you need one?
- What tax reliefs apply to a company reorganisation or a share-for-share exchange or a reconstruction or other transaction involving shares?
- How do you form a group of companies?
| Index to Reorganisations, Demergers & Share transactions | This provides an outline of the tax treatments of a range of different reorganisation topics, together with step guides and tax clearance templates. |
| Groups: at a glance | What is a group and why would you want to form one? |
This index lists but a small selection of our guidance, see the Main menu for further sections and links to more guides.