Avoid These Common Mistakes When Forming a Company

If you are thinking about starting your own business, a lot of people will tell you that company formation is easy. To an extent, it is. After all, you can easily form your company online right now. However, this is ill advised. This is how mistakes are made. Take a look at some of the most common company formation mistakes people make so you can avoid them.

• Incorrect supporting data – You may be required to supply Companies House with some supporting data to assist your application when it is made when a restricted or sensitive name. You need to ensure this data is worded correctly, provided in the right format, and meets the requirements the registrar has laid down.
• Entering the wrong registered address – You need to have an effective address for the registered office for proper company formation in the UK. Companies House may reject your application if the address is not complete or you use a PO Box address.
• Incorrect share allocation – This is another mistake that a lot of people make when it comes to company formation. When you form a business, you can create various rights for each share class, issue different share amounts, and add different classes for shares. If you do not think about how to structure shares properly, this can make things complicated further down the line and you may be subject to further expenses too.
• Appointing minors – You cannot appoint someone under the age of 16-years-old under the Companies Act. Most experts will also recommend that you do not appoint anyone under the age of 18 either as your shareholder or company director. This is not because they are not capable; it is because it can impact future business contracts and bank account applications, as minors may not be able to legally enter into these.
• Forming the wrong type of company – The large majority of limited companies are registered because they are profit-making companies. Because of this, the ideal solution is often ‘limited by shares.’ But, if you are running an organisation and your purpose is not to make profit, this is not going to be the right type of business. In most cases, a ‘company limited by guarantee’ is the better approach.
• Spelling mistakes and typos – Last but not least, you may think this sounds obvious but you would be surprised by how many people do not proofread their application properly. Read it once, and then read it again. Have a break, and then go back to it with fresh eyes. You should also consider getting someone else (whom you trust) to look over it too.

If you can avoid the mistakes that have been mentioned above, you can give yourself the best chance of forming your company the right way. The last thing you want to do is make a small mistake that could impact your startup.