The procedure for starting up a business in the UK is identical for both UK and foreign investors. The forms of doing business available in the UK are as follows:

Private limited company;
Public limited company (PLC);
Partnership (including a limited liability partnership); and
Registered UK establishment (a branch or representative office).

Private Limited Company

The private limited company is the most common form of trading entity in the UK, and for foreign investors, is generally set up as a subsidiary of a foreign holding company or a separate company. A private company can be limited by shares or by guarantee.

The key aspects of a private limited company include:

The liability of the shareholders is limited to the fully paid-up amount of the shares in the company, so unless an explicit guarantee is provided by the parent, the liability of the UK subsidiary does not become the liability of the parent;
There are no minimum share capital requirements;
Incorporation can be undertaken quickly in one day and at low cost;
The shares may be re-denominated into other currencies;
The company can be incorporated with a single shareholder director. There is no maximum number of directors and there are no legal requirements for any director to be a British resident or national. However, a company must have at least one director who is a natural person;
No requirement to have a company secretary;
Private companies are not required to hold annual general meetings and can pass resolutions in writing; and
Any purchase or redemption of the company’s own shares can be funded out of capital.

Public Limited Company

A public limited company must include the words “public limited company” or its abbreviation “PLC” in its name.

The formation of a public limited company requires:

A trading certificate setting out the entitlement to do business and to borrow capital;
Minimum share capital of GBP 50,000 of which at least 25% must be fully paid up, together with the whole of any share premium. Capital may be in non-cash forms. However, any non-cash contributions have to be independently valued;
Two directors and a company secretary (one of the directors can be the company secretary); and
Two shareholders.

It can also choose to be quoted on the stock exchange.

The key aspects of a Public Limited Company (PLC) include:

The formation of a PLC requires a minimum of two directors. No nationality or residency requirements apply;
It has a separate legal personality and affords its members’ limited liability;
A PLC can offer to the public any shares or debentures in the company; and
The company may have multiple classes of shares with different conditions attached to them.

Conversion of a Private Limited Company to a Public Limited Company

A private company (whether limited or unlimited) may re-register as a PLC. The private company must pass a special resolution that it be so re-registered and deliver a copy of the resolution together with an application form to the Registrar of Companies. The resolution must:

Alter the company's memorandum so that it states that the company is to be a public limited company;
Increase its share capital to the statutory minimum of GBP 50,000 with minimum 25% paid up; and
Make any other alterations to the memorandum and articles so that it conforms to that required for a public limited company.

Conversion of a Public Limited Company to a Private Limited Company

A public limited company may re-register as a private company (limited or unlimited) with few formalities such as the passing of a special resolution and making requisite alterations in its memorandum and articles of association.

A court may also order a public company to re-register as a private company as a result of a reduction of its share capital below the statutory minimum required for a public company, i.e., GBP 50,000. In such a case the court will also specify alterations to the company's memorandum and articles. A special resolution to re-register is not required.

UK Societas

It has been possible to set up a Societas Europaea (“SE”) in the UK since 2004. However, after the end of the Brexit transition period, effective 1 January 2021, SEs registered in the UK have automatically been converted into United Kingdom Societas (“UK Societas”), and new UK Societas can no longer be formed.

A UK Societas must have share capital and shareholders whose liability is limited in a similar manner to that of a PLC. A UK Societas may denominate its share capital in any currency it chooses, provided that at least GBP 50,000 is denominated in Sterling or EUR 57,100 is denominated in Euros. Regardless of the currency in which it is expressed, a UK Societas is required to have a minimum amount of subscribed share capital equivalent to at least EUR 120,000.

Partnerships

General, limited and limited liability partnerships are available in the UK.

General Partnership

General partnerships are unincorporated partnerships where the partners have unlimited liability for the debts and obligations of the partnership.

Limited Partnership

In limited partnerships, there should be at least one general partner (which can be a limited liability company) with unlimited liability. The other participants may be limited partners whose liability is limited to their capital contribution. Limited partners must not take part in the management of the partnership business in order to preserve their limited liability.

Limited Liability Partnerships

The key aspects of Limited Liability Partnerships (LLPs) include:

A separate legal personality;
Limited liability of members;
A member of an LLP may be any natural or legal person, e.g., an individual, a company or another LLP;
There is no limit on the number of members of an LLP, however, at least two designated members are required for ensuring compliance by the LLP with procedural and administrative requirements. If there are fewer than two members, every member is deemed to be a designated member.

Taxation

For UK tax purposes, LLPs are transparent and therefore tax is assessed on the members individually rather than on the LLP. Where a foreign company enters into a partnership with existing business entities either through a foreign or UK LLP, the foreign company will usually be treated as having a permanent establishment in the UK through the agency with its UK partners (if it does not have a permanent establishment in its own right) and will therefore be subject to UK corporate tax on its share of the profits of the LLP.

Powerful Tax Solutions

Tax Rules Engine

Collaboration Tools

Latest Tax News