Incorporating a new company is an exciting new milestone in your career; however, it can often be accompanied by some avoidable mistakes. Ensuring these vital steps are done correctly can reduce the risk of long-term headaches you may face along the way. Here are some of the most common mistakes people may make and how to avoid them.
1. Overlooking Director Responsibilities
Every Director has the legal responsibility and duty to file their annual accounts, maintain statutory registers and to report any changes to Companies House for their company. While filing late can be an easy mistake to make, it is vital that you remain compliant to Companies House and statutory requirements to avoid any consequences, for example, your company being struck off the register, receiving penalties, fines or being disqualified as a director. This is something to consider that you can take full responsibility for before you incorporate a company. This is not dispelled by hiring a third party to file on your behalf as the responsibility ultimately remains with the directors.
2. Choosing the Wrong Company Structure
Many founders who are in a rush to incorporate often choose the wrong structure without understanding the difference between the different types of structures available. It is important to do your research on which type of company you wish to incorporate. Choosing the wrong company structure can often lead to administrative burden, tax obligations and can affect your ability to raise investment and your liability. Changing the structure is possible but it can be more costly and time-consuming.
3. Skipping a Shareholder or Partner Agreement
Once a business gains attraction, skipping a shareholder or partners’ agreement can become a major liability if forgotten. Without an agreement, disputes may escalate into legal battles because there is no agreed upon framework to fall back on. Having an agreement can prevent these disputes and they enhance trust, create clarity and protect business relationships to ensure that a company can grow successfully without unnecessary disagreements. In addition to this, a proper agreement will define what happens to people’s shares once they leave, whether the company can buy them back and how decisions will be made without them.
4. Using Generic Articles of Association
Default model articles are designed to be legally compliant but however are sometimes not strategically useful for growth of your company. Choosing the correct articles for your company is essential to avoid any future legal issues, should they arise. On incorporation, you can adopt Model Articles (prescribed by statute) or 1st Choice Incorporations standard articles free of charge. If you would like to adopt bespoke articles of association, a copy will need to be provided upon the incorporation of the company. Feel free to contact us if you are having trouble choosing the best articles for your company.
5. Registering the Company at the Wrong Address
When incorporating your company, it is important to consider which private details you are happy to be made public on the register. Your registered office address and service address become part of the public record as soon as your company is incorporated. Using a home address can raise privacy concerns as well as providing no separation between your home and work life. Director’s often use companies, such as 1st Choice Incorporations, who offer their address services to be purchased. This means that your private residential address is kept off the register and all your mail will be sent to the corresponding address.
1st Choice Incorporations will be happy to help you incorporate your new company to ensure all the mistakes listed above are avoided. If you are ready to incorporate, get started here and we will be in touch.
