7 mistakes to avoid when setting up a limited company

limited company

Anyone who wants to set their business as a limited company should be aware that there are many obstacles along the way. If you’re thinking about starting a limited company, it’s important to be aware of the potential mistakes you could make.

In this article, we’ll look at some of the most common mistakes people may make while forming their limited company. Take a good read and see where you might be going wrong.

Table of contents:

  • How much time would it take to form a limited company?
  • Common kinds of mistakes made during the formation of a limited company in the UK.
  • Choosing a pre-existing company name
  • Setting up the wrong type of company
  • Appointing under-age directors
  • Spelling mistakes or information errors
  • Issuing too many shares
  • Proving a wrong registered office address
  • Creating a limited liability company rather than limited by guarantee

How much time would it take to form a limited company?

In the UK, one can register a limited company within 24 hours. This time may vary according to the Companies House workload. However, postal applications may take eight to ten days.

Common kinds of mistakes during the formation of a limited company in the UK

There are a few aspects you should be aware of and avoid if you wish to register successfully. Read on to know more.

1-   Choosing a pre-existing company name

There are a few reasons why choosing an existing name can be a problem. First, if another company already uses the name, you won’t be able to register your company with that name. Second, even if you can register your company with the name, it could still confuse those trying to find information about your company online.

Therefore, it is best to choose a unique name for your company that isn’t already being used by another business.

2-   Setting up the wrong type of company

When forming a limited company in the UK, it is important to avoid setting up the wrong type of company. There are four different types of limited companies that can be formed in the UK.

Each type of company has its advantages and drawbacks, so choosing the right type of company for your business is important.

3-   Appointing under-age directors

Appointing a director less than 16 years of age would lead to rejection of the application by Companies House. This is because directors have several important legal responsibilities. There are many drawbacks to having a minor director, both legally and financially.

4-   Spelling mistakes or information errors

One of the main things to watch out for is inconsistencies and spelling mistakes in your documentation. This can cause problems when trying to register your company with Companies House, as they will be looking for accurate and up-to-date information. Double-check before submitting.

The Companies House SIC codes or Standard Industrial Classification Codes should be filled very carefully. These codes appear in EDGAR filings and reflect the type of business a company runs. Any error in these codes can lead to failure in setting up a limited company.

5-   Issuing too many shares

This can create problems if you want to raise money from investors or sell the company. If you issue too many shares, it can make your company less valuable and increase the risk during dilution.

6-   Providing a wrong registered office address

It is important to provide a registered office address that is suitable or unfindable for your company. An unsuitable registered office address can lead to several problems, including:

 

  • Your application can be rejected.
  • Your company may be subject to legal action if a discrepancy is found.
  • Your company may have difficulty in terms of financing.
  • You won’t be able to receive important correspondence.

 

An actual physical address should be provided where Companies House can contact your company anytime it wishes.

7-   Creating a limited by guarantee rather than limited liability company

Make sure to pay attention to the type of company you are forming. This can have huge legal impact on the business and its shareholders. If the wrong type of company is registered, one would need to dissolve the existing establishment and register again.

Drawing the last line

A lot of people who are in the process of making a company often end up making mistakes that can cost them a lot. There are ways through which you can register your company online in the UK.

These online databases are trained to help the filing authority avoid mistakes. It is always advised to take legal help from experts to get a deeper understanding of the process. In case you are facing trouble filing your papers, feel free to contact Mishoura and connect with the best lawyers around the world.

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