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


How to start a company

How to form (incorporate) a private limited company and the points you need to consider.

Issuing shares

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.

Share capital: what's an ordinary share?

You need to create useable share classes: setting up the wrong kind of share class could lose all your tax reliefs.


Share certificate
 

A template for creating share certificates.


Setting up different share classes: family companies

Sometimes founders and owners may create special share classes for themselves. This guide explores the issues, pitfalls and planning points.

Which relief: IR v BADR v SEIS v EIS

You are bringing in shareholders and investors, what reliefs may be open to them and who qualifies:

  • Links to detailed guides on each of the key reliefs available to UK investors.

  • Link to Business Investment Relief guide for overseas investors.


Which investment relief? IR, BADR, SEIS or EIS

 Still unsure which investor relief works best? Here is a comparison.

  • What is the difference between Business Asset Disposal Relief 'BADR' (formerly Entrepreneurs' Relief) and Investors' Relief?

  • How do they compare to investments in the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)? 

 

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 too.
  • A company must issue its directors with service contracts.
  • If you have different shareholders, it's advised to have a shareholder agreement.
Shareholder Agreement A basic template listing some of the key points that shareholders may wish to agree on.

Director's Service Contracts

Director's service contracts, top tips

Template of key points

Top tips on creating a written service contract as required by the Companies Act 2006.

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 between employment law and tax law. This can catch out many office-holders.
Directors & NMW An office-holder such as company director or secretary is not an employee for the purposes of the NLW/NMW unless he is 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 its worth exploring in detail our Employee benefits & expenses section.
Setting up share classes: directors and employees Companies often create special classes of share 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

Our section contains practical tax & business guides on a range of key topics that affect the day to day running and tax treatment of companies, including:

Running the business  This section contains practical tax & business guides on a range of key topics that affect the day to day running and tax treatment of 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's 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.

 


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