For many years, a London-based company has been providing legal support for those who move to Great Britain and set up their business here. We have asked our accounts manager Vasily Kluev how to choose a company type and what issues related to the corporate, tax and immigration law a new UK entrepreneur might face.
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How to choose a legal form for your UK company
To make the right choice, you need to have a clear understanding of what you will be doing in Great Britain. There are four types of companies that are suitable for doing business in the UK. Each has its own advantages.
1. Limited liability company (Limited, Ltd)
There are two types of a limited company: a company limited by shares and a company limited by guarantee.
As the first type suggests, a founder’s share in the distribution of profits and liability for debts is determined by the number of shares they get in return for investment.
Companies limited by guarantee are set up for non-commercial or charitable purposes. Such companies do not have shareholders but have guarantors, i.e. persons whose liability for debts is limited to a certain amount of money, the so-called guarantee.
2. Public limited company (Plc)
A company of this type issues its shares with an aggregate value of over £50,000, of which at least 25% must be paid up. The issued shares can be traded on a stock exchange.
In case of bankruptcy of a Plc, the liability of the shareholders is limited to the value of their shares.
3. Limited liability partnership (LLP)
A characteristic feature of this type is a special tax regime. Corporation tax is not paid by the legal entity but rather by its partners. Such partnerships do not pay stamp duty when they buy or sell real estate.
Designated partners (there must be at least two in the partnership) are legally responsible – up to criminal prosecution – for the accuracy and order of reports submitted. All partners are liable for the company’s debts, but up to the amount invested at the time of registration.
4. Scottish limited partnership (SLP)
In addition to the specific location, such partnerships have a number of other features:
– Two types of partners in a partnership: general partners take part in the management of the company and are fully responsible for the SLP’s performance; limited partners do not take part in managing the company and are solely liable up to the amount of money invested in the partnership at the time of registration.
– If a Scottish limited partnership does not operate in the UK, there is no need for it to report to the HMRC.
In other respects, including the principles of interaction with the tax authorities, an SLP is not much different from a traditional LLP.
How to relocate to the UK
To advise you properly, immigration advisors need to know whether you are going to run your own company or entrust the development of the business to a hired director and whether you plan to move to the UK or prefer to do business remotely.
- Work visa. This type of visa will be required for your non-British director if you decide to hire them to manage your business. The immigration authorities have a number of requirements related to the applicant’s qualifications, language skills, and reputation. The inviting company sponsors its specialist and must have a licence.
- Representative of an Overseas Business visa. This type of visa is ideal of a manager who is employed by an overseas company and who is sent to the UK to manage the parent company’s subsidiary here. It is an affordable way to move to the UK, provided that you have a managerial position in the parent company outside the UK and are not a majority shareholder in it.
- Innovator and Start-up visas. Both visas were introduced to replace the Tier 1 Entrepreneur visa but they did not replace it fully. Both visa types require an applicant to have a promising business idea that will generate profit while the British economy will benefit from new products, services, and taxes. The key requirement of the Innovator visa is the amount of investment – at least £50,000. Therefore, it is more suitable for experienced entrepreneurs who plan to expand their business to the British market. A holder of a Start-up visa is not expected to invest anything straight away but this visa cannot be extended. If you want to stay in the UK and in the future apply for an indefinite leave to remain (ILR), you will need to switch to another type of visa.
- Investor visa. This category is more suitable for well-off investors who are ready to invest a lot of money in the British economy. The minimum investment stands at £2,000,000. Once money is invested, you are free to do what you want in the UK – no need to prove proficiency in English or professional experience. After five years of having lived in the UK, you and your family will be able to apply for an ILR after an English test and Life in the UK test.
UK company’s relationships with regulatory authorities
Anyone who is not familiar with the British legal system might be confused by all the procedures related to setting up a company, running a business, managing financial and tax records and finding new employees. Regular violations of the rules lead to the closure of business and even to administrative and criminal liability.
Partly, you might be overwhelmed by it because of the stark contrast between strict regulations and relative simplicity of setting up a company in the UK. However, the UK corporate law is not more complicated than regulations in other countries; it just takes time to get used to legal nuances. If you wish to avoid mistakes in running a business, Imperial & Legal has three special packages to offer:
The Standard Package will help you set up a company in the UK. It includes the following services:
- Checking a unique company name for availability and preparing the required documents and forms necessary for setting up a business.
- Filing an application with the Companies House and getting a registration certificate as well as copies of memorandum and articles of association.
- Securing a registered address for a year.
- Administrative support of a corporate secretary for a year.
II. STANDARD PLUS
Apart from the “Standard” services, it includes the following:
- A client is provided with an office manager speaking at least two languages. They will be responsible to process calls, emails, and post, and forward them to you while preparing detailed weekly reports.
- A postal address for correspondence.
- A telephone number.
- Access to a meeting room in a London office.
These two packages mean that you will have to take care of most business-related matters yourself, or, on the contrary, you have just registered a company and are not trading yet. The third package is specifically designed for holders of Innovator, Sole Representative and Start-up visas:
It includes all the basic services of the previous packages plus it aims at other tasks that are quite complex and include the following:
- An address to open an account with a UK bank and actual opening of an account. Anyone who has already tried to bank with an English bank will definitely appreciate the service.
- VAT registration of a company.
- Assistance in applying for business visas for 2 people.
- Regular business consultations with our specialists.