Corporate Services in the UK

Why set up your company in the UK

The UK continues to be the number one destination for attracting foreign direct investment in Europe, and third globally after the US and China. There are no currency or exchange controls or restrictions on foreign investment. The UK also offers a world-class skills base, Europe’s strongest research and development environment, a proven long-term return on investment for international businesses and an excellent quality of life.

The structure you choose will have significant implications on the amount of tax you pay, the extent of your personal liability, the amount of administrative work involved and your ability to raise finance. Starting out with the wrong set-up can lead to a lot of complications later.

Sovereign can help you navigate through all of the complexities of the company registration process. For more information on how we can help you set up your business in the UK please read on. If you would like to know more about the private client services we offer, including assistance with property purchases, setting up of trusts and moving to the UK, please click here.

Setting up the right company in the UK

Incorporation provides many advantages for a business and its owners: protection from personal liability for business debts, improved access to financing for business activities, simple transfer of business ownership through the disposal of shares and increased potential for tax planning through access to corporation tax rates and international tax treaties.

A company is tax resident in the UK if its business is managed and controlled in the UK. However, its operations are not subject to any geographical limitation; a UK company is free to trade and engage with third parties worldwide.

There is no restriction on the nationality or country of residence of the ultimate beneficial owner(s) of a UK company and corporate ownership is also permitted. Private UK-registered companies must have at least one company director (public companies require two). The 2006 Companies Act stipulates that at least one of the company directors must be a natural person, i.e. an individual.

Choosing a name for your business is a process that you need to get right. Being objective and choosing the company name that best reflects your business strategy is valuable, especially as your business develops.

Sovereign can provide advice on:

The type of company best suited to your commercial purpose.
Arranging the ownership of that company.
Administering the company correctly.
Managing its commercial arrangements.

In addition to the company formation process, we can further provide the administrative support to maximise opportunities and achieve long-term sustainability, from full back-office solutions to assistance with tax and regulatory compliance. This includes accountancy, human resources, pensions, insurance, trademark and intellectual property protection, obtaining local licences and permits, business bank accounts, executive relocation and specialist tax advice.

Types of company in the UK

Private Company Limited by Shares

Private companies limited by shares are the most frequently-used type of company in the UK. They are generally called a private limited company and must have the word ‘Limited’ (or the abbreviation ‘Ltd.’) at the end of their name.

Unlike a sole trader, who is personally liable for all debts associated with his or her business, private limited companies exist in their own right. This means the company is legally separate from the people who run it, has separate finances and can keep any profits it makes after paying tax.

The liability of the shareholders to creditors of the company is limited to any money they originally invested. A shareholder’s personal assets are protected in the event of company insolvency, but money invested in the company may be lost.

Unlike public limited companies there is no minimum capital requirement for a private company limited by shares, so they can be set up with a very small capital investment.

Company directors run the company on behalf of the shareholders. Private limited companies are required to have at least one director and at least one shareholder, which can be the same person.

Private Company Limited By Guarantee

Private companies limited by guarantee are typically used for non-profit organisations such as charities, clubs, unions and societies because a members’ liability is limited to a pre-agreed amount.

There is no share capital and therefore no shareholders. Members of a private company limited by guarantee are guarantors and are often only liable for a nominal sum, such as £1, if the company is wound up.

A company limited by guarantee must have at least one director and one guarantor. An individual may assume both positions, or there can be multiple directors and guarantors.

Public Limited Company (PLC)

Public limited companies, generally abbreviated to ‘PLCs’, are permitted to sell shares or debentures to the general public, usually through a stock exchange. The liability of the PLC is limited to the value of its reserves, so the liability of shareholders is restricted only to the amount they paid for their shares.

To become a public limited company, a business must have share capital of £50,000 or more, of which at least 25% must have been paid up before the company can begin trading. PLCs are also required to have at least two directors and a company secretary.

PLCs are often established as private limited companies before being re-registered as a PLC in order to raise capital for expansion or because they intend to list in the future.

Holding Companies

A good reason to relocate to the UK is to take advantage of the UK company as a highly tax efficient investment holding structure for the receipt of foreign dividends. When setting up a UK holding company, Sovereign will consider individual client requirements and circumstances before proposing a solution, but the following considerations will generally apply.

The distribution exemption applies to dividends received by a UK holding company from a qualifying overseas company. The conditions are different depending on the size of the UK holding company but typically there will need to be a double tax agreement (DTA) between the UK and the country in which the company paying the dividend is resident. If the exemption applies, then there will be no UK tax imposed on the dividend.

Qualifying Asset Holding Company (QHAC)

The ‘qualifying asset holding companies’ (QAHCs) rules were brought into force on 1 April 2022 to introduce an alternative UK regime for holding companies, with beneficial tax treatment for qualifying entities and their investors. It was intended to enhance the UK’s competitiveness as a location for asset management and for investment funds.

The regime is designed for asset holding companies (AHCs) that meet certain criteria and are used in a range of collective and institutional investment structures to hold investment assets, and the investment funds, institutions, individuals and other entities that invest in those structures.

Trading Companies

If an overseas company is carrying on business in the UK via the establishment of a fixed or permanent base – ‘permanent establishment’ (PE) – but does not wish to set up a separate legal entity, it is required to register the UK establishment (branch) with the UK’s registrar of companies (Companies House).

Legally, a UK branch is considered the same entity as the parent company. It does not therefore have an independent legal personality and all profits and losses of the UK branch are incorporated with those of the overseas parent. Any debts and liabilities of the UK establishment will also be attributed to its parent company. A UK establishment is required to file annual accounts that are publicly available.

Types of partnership in the UK

About Business Partnership Structures

There are three types of business partnership structures:

‘Ordinary’ partnerships
Limited partnerships
Limited liability partnerships (LLPs)

All three types of partnership allow two or more persons (the partners) to share the risks, costs and responsibilities of being in business. Partners raise money for the business out of their own assets and/or with loans. A partner can be an individual or another business.

The profits and gains of the partnership are shared among the partners, unless the partnership agreement states otherwise. Each partner is personally responsible for paying tax on their share of the profits and gains.

'Ordinary' partnerships

‘Ordinary’ partnerships

An ‘ordinary’ partnership is a relatively simple and flexible way for two or more people to own and run a business together.

An ‘ordinary’ partnership has no legal existence distinct from the partners themselves. If one of the partners resigns, dies or goes bankrupt, the partnership must be dissolved, although the business can continue.

Ordinary partnerships also have to be registered with HMRC for tax purposes.

Limited partnerships

A limited partnership is made up of a mixture of ordinary partners and limited partners. A limited partner’s liability is limited to the amount of money they have invested in the business and to any personal guarantees they have given to raise finance.

Limited liability partnerships (LLPs)

LLPs must have at least two designated members. LLPs are taxed as partnerships, but have the benefits of being a corporate entity, and members have limited liability.

LLPs must register with Companies House, send Companies House an annual return and file accounts with Companies House.

When they receive the registration Companies House inform HMRC that the LLP has been set up. HMRC will set up the LLP’s tax records so there is no need to register with them.

Why incorporate with Sovereign?

With over three decades of experience in the corporate services field, Sovereign UK’s services include forming new corporate structures, reorganising corporate structures and repatriating earnings. We also provide the necessary expertise in administering and managing companies, including company law, board procedures, director responsibilities and shareholder relations, and financial and corporate compliance requirements.

Following incorporation, Sovereign can provide on-going domiciliary services of the highest quality to maintain your company’s good standing in the UK. This includes the provision of registered office facilities and (if required) nominee shareholder services, together with making annual filings to Companies House. A company secretary is not obligatory for private companies under UK law but company secretarial services can be provided where required.

Re-mailing and virtual office services are available for all companies established by Sovereign. Registered office facilities are provided as part of the domiciliary service from our dedicated corporate services centre in Chester. A central London registered office address is also available, if required, subject to an annual premium of £500.

Sovereign further provides directors for many of the companies that we incorporate in order to ensure that their affairs can be properly managed and controlled from their place of incorporation. This service is often combined with our other company management and / or our domiciliation services.

Our directors are required to meet their directors’ duties, which require them to exercise independent judgment. It is a condition of any appointment that the director(s) are able to exercise their independent judgement and are fully involved in any decision. Under certain circumstances Sovereign can provide corporate and personal directors that are based offshore.

Sovereign is well-placed to assist corporate clients, particularly those from outside the UK, in creating ‘economic substance’ in the UK. These services can include office provision, introduction to property sourcing specialists, estate agents, chambers of commerce, government agencies and other third-party providers.

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