Unlocking Success: A Guide to Registering a Business in the United Kingdom
INTRODUCTION
Setting up a UK-based business establishment offers numerous advantages for business owners. This article outlines the administrative and legal aspects of incorporation and delves into the long-term benefits.
A UK-incorporated establishment is a distinct legal entity capable of owning assets and entering into contracts in its name. The legal entity if it is a company will operate under the guidelines of the Companies Act 2006.
There are various types of companies in the UK, – private limited companies, private companies limited by shares, private companies limited by guarantee, private unlimited companies, public limited companies, etc and the classification depends upon factors like ownership, liability, and business structure, etc.
When opting for incorporation, it’s crucial to understand the type of company that one would incorporate to ensure proper steps of registration with Companies House.
GUIDANCE ON ESTABLISHING YOUR FOREIGN ENTITY IN THE UK
Branch -v- Subsidiary
The terms ‘branch’ and ‘subsidiary’ is often used interchangeably by business organisations, however, they are distinct entities. Generally, a ‘subsidiary’ refers to a company that is legally distinct from another company, but which is wholly or partially owned by a parent company. The Parent company hold at least 50% of the shares in the subsidiary company.
On the other hand, a ‘branch’ does not necessarily refer to separate companies. It refers to different offices or locations of a single company.
Branch
A branch denotes a business operating across various physical locations and markets. Establishing a branch in the UK facilitates efficient foreign exchange transactions with favourable interest rates, minimal regulatory oversight, and access to global payment systems. The UK’s transparent and dependable financial infrastructure provides a robust foundation and enhances your company’s reputation. Nonetheless, an unregistered branch lacks a distinct legal identity, complicating the sponsorship of migrant workers.
Subsidiary
Subsidiaries enable a business to section off different aspects of its operations into distinct companies. Businesses often utilise subsidiaries for reasons such as entering new markets, raising finance, separating valuable assets, and optimising accounting and tax treatments. Establishing a subsidiary limits the parent company’s liability, facilitate market expansion, and increases business efficiency. However, this approach can also present challenges such as management difficulties and reduced control.
CHANGES TO UK COMPANIES WITH EFFECT FROM 4TH MARCH 2024
1. The mandatory requirement to use an appropriate address as a registered office.
An appropriate address for a company is where documents delivered by hand or post would reach someone representing the company, and where deliveries can be acknowledged.
If any company uses an inappropriate address as a registered office, Companies House will change it to a default address. The company must then provide an appropriate address with proprietary evidence within 28 days. Otherwise, Companies House may initiate the process to strike off the company.
This change to UK company law will apply to all limited companies, limited liability partnerships (LLPs), limited partnerships (LPs), and Scottish limited partnerships (SLPs) registered in the UK.
2. New statement of lawful purposes
Companies will have a duty to confirm that their intended future activities will be lawful. This new rule will apply to new and existing companies. On an application to register a company, the subscribers (founding members) will need to confirm that they are forming the company for lawful purposes.
3. Introduction of soft filing of annual accounts
To streamline the filing of annual accounts, Companies House will gradually move towards software only filing of accounts. All other filing options for accounts will be phased out.
It is important to note that more than 65% of UK companies already use software filing to submit their annual accounts, therefore this change will have no impact on those companies.
Companies House will provide more updates once the timeline for the incremental roll-out of the change to software-only filing has been agreed. These new measures will be introduced over the next two to three years.
4. Exemption of audit
Certain companies qualify for audit exemption, including small companies and micro-entities, dormant companies, parent companies, and subsidiaries.
As a result of the changes to UK company law, the directors of any such company claiming exemption from audit will need to include an additional statement on the balance sheet.
The statement must identify which exemption they are claiming (e.g. small company; dormant) and confirm that the company qualifies for it.
The new requirement will apply to any UK company or incorporated partnership that wishes to claim exemption and file unaudited accounts.
Conclusion
Establishing a business in the UK offers significant advantages, from robust legal protections to a favourable business environment. Understanding the types of companies available and the distinctions between branches and subsidiaries is crucial for making informed decisions. Recent changes to UK company law further underscores the importance of compliance and strategic planning.
By adhering to these guidelines and leveraging the benefits of incorporation, business owners can position their companies for long-term success and growth in the UK market. Whether you are a new business owner or a foreign entity looking to expand, the UK provides a transparent and supportive framework for your entrepreneurial endeavours.
HOW KTS LEGAL CAN HELP?
If you’re a business owner planning to establish your enterprise in the UK, whether as a new company or a foreign entity, we are here to offer proactive legal guidance. We assist with legal representation before the relevant UK authorities, ensuring your business meets all regulatory requirements.
Understanding the various forms of establishment is crucial be it a branch, subsidiary, or joint venture. We tailor our legal advice to suit your business needs, fostering growth and ensuring compliance with UK laws and regulations.
We also provide additional support by offering our clients a curated list of necessary documents and prepare Memorandum and Articles if required, ensuring thorough and comprehensive legal assistance throughout your business establishment process.
Please reach out to us today to explore our comprehensive start-up legal services and guide you through the complexities of UK company law.
You can contact us on the telephone at +44 20 8367 0505 or email us at info@ktslegal.com for further assistance.
