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Setting up a company online in the UK is relatively simple, but some common pitfalls could cause Companies House, the UK registrar of companies, to reject your application. These mistakes concern company names, the legal structure, and officer details.
The UK’s leading company formation agent, Quality Company Formations, reveals the 6 most common mistakes to avoid to ensure your application is accepted the first time.
- Choosing a non-compliant company name
One of the most frequent mistakes we see in online company applications here at QCF is applicants attempting to register company names that do not comply with company names legislation.
In the UK, there are specific rules and restrictions concerning company names, a key one being that they must be unique. They also must:
- End with ‘Limited’ or ‘Ltd’ (or ‘Public limited company’ or ‘PLC’ if a public limited company)
- Not contain any offensive or sensitive words
- Not contain prohibited symbols, characters, or punctuation
- Not imply a connection to a government body or public authority
- Be under 180 characters long
These rules are extensive and can be complex, especially for first-time applicants, resulting in people attempting to set up a company online under a non-compliant name.
The best way to check if Companies House will accept a company name is to use the company name checker on the QCF website. You’ll get an instant response as to whether your ideal company name is available, and you can secure it within 24 hours if so.
- Registering the wrong legal structure
Understanding the differences between different legal structures is crucial when registering a company online, as it will determine your company’s internal rules, what it is allowed to do with profits, and its filing obligations.
Here are the most common corporate structures in the UK and their key differences:
- Private company limited by shares (LTD)
- For-profit business
- Owned by shareholders
- Cannot trade on stock markets
- Requires at least one director and one shareholder at incorporation (can be the same person)
- Company secretary appointment is optional
- Subject to the Companies Act 2006
- Private company limited by guarantee
- Normally for non-profit ventures (i.e. charities)
- Must have at least one director and one guarantor (can be the same person)
- Has no shares or shareholders
- Public limited company (PLC)
- Cannot trade until it has at least £50,000 in issued share capital, at least 25% of which is paid up (LTDs can trade immediately after incorporation)
- Cannot trade before receiving a trading certificate from Companies House
- Financial reporting obligations are more extensive than LTDs
- Must appoint a qualified company secretary
- Requires at least two directors
- Can trade on stock markets
- Subject to additional laws and regulations on top of the Companies Act 2006
- Limited liability partnership (LLP)
- Must be for-profit purposes
- Subject to the Companies Act 2006 and the LLP Act 2000
- At least two members are required at all times
Additional reporting requirements and deadlines will apply to each company type.
That’s why it’s essential to understand these differences and requirements to ensure that you set up and run a compliant business.
- Grammatical and spelling errors
Another common mistake we find in online company registrations is typos. These often appear in the company name and officer details.
An error in your company name won’t necessarily cause Companies House to reject the application, but it will result in registering an unwanted company name. There is then a particular legal process to follow to correct the company name. The old name will remain on the company’s filing history on the public register, potentially making your company look incompetent to future investors.
Inaccuracies in officer details could invalidate your application. For instance, directors’ full names and dates of birth must be correct to ensure they meet the qualifying conditions. It also helps Companies House keep an accurate register.
Remember to check your application for grammatical or spelling errors or misinformation.
- Providing an unacceptable registered office address
The registered office address is the company’s official contact address. This is where it receives all its official correspondence for government bodies like HMRC and Companies House.
When setting up a company, there are specific rules regarding what can and can’t be a registered office address. Firstly, it must be in the same part of the UK where the company is registered. For example, if you register a company in Scotland, its registered office address must also be in Scotland.
Secondly, it must be an ‘appropriate’ address. This means that mail delivered to the address would be expected to come to the attention of someone in the company, and the sender must be able to receive an acknowledgement of delivery. In other words, a PO Box would not be considered ‘appropriate’, but a professional registered office address service which sends your mail on (by post or scan and email) would be.
- Choosing the wrong articles of association
A key part of the company setup process is choosing your articles of association. Every UK company must have this core governing document, and selecting the wrong type could cause legal complications.
Most new companies adopt the model articles, the default rules Companies House provides. However, these are basic and can be problematic for sole-director companies and those wishing to issue multiple share types. In these instances, you’d need to use bespoke articles during registration.
- Choosing the wrong SIC codes
Finally, many people make the mistake of selecting the wrong Standard Industrial Classification (SIC) codes. When setting up your company, you must provide between one and four SIC codes describing the nature of your business activities.
While there are no penalties or fines for registering the wrong SIC codes, this mistake can lead to banks rejecting applications for business bank accounts and loans, as well as allegations of misleading the public. You can fix incorrect SIC codes quickly and easily by filing a confirmation statement.
In summary
Some of these common mistakes when setting up a company online can be severe, difficult to rectify, and even lead to your application being rejected.
Get your application right the first time with QCF. Our quick, simple, and user-friendly online company registration form makes it easy to understand the required information and what different industry terms mean.
Our team of experts will check your application for errors before sending it to Companies House, reducing your administrative burden and maximising your chances of approval.
David Prior
David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.
