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Low Cost UK Company Formation – What’s The Catch?


Anyone can charge you anything they want if you want to buy it from them badly enough.

Someone could offer to sell you the glass of water they had in their hand for £200. If you had not a drop of water to drink for two days, you would pay it.

At the other extreme, commonplace goods and services can be cheap, medium-priced or expensive, depending on supply, demand and perception of value.

I will buy a used Rolex watch from you for £5000 if I perceive it’s actually worth £7000 and/or I actually want a nice watch.

Why?

Because there are not too many such watches available, Rolex is an expensive brand and is well-known, or used to be known, for the high quality of its goods. Therefore, £5000 is a reasonable price for a used one.

Something like a company formation is more difficult to price accurately for the entrepreneur who wants to set up in business in the UK.

Should he buy:

- A cheap formation from a cheesy website;
- A cheap formation direct from Companies House;
- An expensive formation from an established agent;
- None of the above?

Let’s examine the options:

1. A cheap company formation from a cheesy website.

This should be avoided. While it’s possible that the formation may go through OK, there may be problems later.

One thing that can go wrong is that details are submitted in incorrectly.

- Your public mailing address is submitted as your home address instead of the address of the virtual office provider;

- The company name is submitted with an error in it;

- The proportion of the shareholdings is incorrect;

- The submitter can’t and won’t help you when you need to change something in your company setup;

- The virtual office provider you used has gone out of business when you need to get a letter sent to their address;

- The virtual office provider is demanding excessive payments to perform simple tasks for you;

- The formation agent gives you a basic incorporation certificate and nothing else.

It’s like buying a pair of jeans off the internet.



Do you think that a generic pair is going to be of the same quality and last as long as a pair of Levis? If you buy jeans from a market stall or Marks & Spencers, which vendor is more likely give you your money back if you’re not happy with the goods?

One sees it constantly in 21st century first-world countries: you can have it cheap, fast or high-quality; pick two out of three.

What is produced cheaply is often not high-quality. Indeed, the word ‘cheap’ itself has become synonymous with low-quality.

With company formations, the formation itself can be done cheaply; it’s just a submission of data in a web form to Companies House.

What matters is the follow-up.

2. A cheap company formation direct from Companies House.

This is not a bad idea if:

1. You know what’s involved in a company formation i.e. the technical terms;

2. You are happy to use your home address as your public registered office, or you have your own office.

3. You don’t mind getting just a bare Incorporation Certificate at the need of the process.

Currently, the fee is only £13 at the time of writing.

Point no. 2 above is a sticking point for a lot of people. They don’t want to see their home address listed online.

Many websites import Companies House data into their own website, so your name, address, month and year of birth can end up in a lot of dubious-looking places on the internet.



In this situation, the smart move is to have already bought a mailing address which you can use at Companies House when you are doing your submission there yourself.

3. An expensive one from a long-established company formation agent

This can work very well.

If you pay a goodly amount of money, you have the moral right to ask for personal assistance if you don’t understand what you’re buying.

Some long-established websites offer a concierge or secretarial-style service to their clients. They can offer nominee directors, sophisticated company structures and tailored financial investment advice.

Gentlemen with upper-class accents who remember the Beatles as a bunch of young scruffs can guide you towards the best possible outcome for your initial company formation setup.

This option suits businessmen who have money to spend and want a servant to deal with the dull parts of establishing a presence in the United Kingdom.

It is not necessary for startups who are merely testing the waters and are unsure of how they will ultimately proceed. It’s too expensive.

4. None of the above.

The smart way to get a formation done is first to familiarise yourself with what the following terms mean:

- Limited Company;
- Share;
- Shareholder;
- Director;
- Company Secretary;
- Registered Office;
- Director’s Correspondence (Service) Address;
- Confirmation Statement;
- Person With Significant Control;
- Annual Returns.

You then find an online company that lets you form the company direct through them.

They should be able to provide a mailing address so you don’t have to use your own.
They should have an online interface that lets you download the documents resulting from your submission.

The staff should be able to answer basic questions about company formations and offer solutions if anything goes wrong.

With this option, you can have your company up-and-running in 48 hours in the working week.


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