© Fox Williams LLP 2006

How is a company incorporated?
 Incorporating a company is a quick and simple procedure which can usually be done on a standard basis within 3 to 5 working days or on the same day for an increased fee. You will need to submit to Companies House:

•	form 10 (detailing, amongst other things, the officers of the company):
•	form 12, (a statutory declaration given by a director or the lawyer forming the company that all the requirements of incorporation have been completed);
•	the Memorandum and Articles of Association of the company (its constitution and byelaws); and
•	a registration fee (currently £20 or £80 for a same day incorporation).

Alternatively you can buy a pre-formed company 'off the shelf' from a company formation agent (or Fox Williams) who will then change the company's name and other details accordingly. When Companies House has received the relevant documents and the incorporation fee, provided everything is in order, a certificate of incorporation will be issued, which is conclusive evidence of the incorporation. The company is also issued with a registration number that will remain the same even if the company changes its name.

What are the main types of business for profit structure in the UK?
 Sole trader
A sole trader is the simplest, least regulated form of business structure in the UK. A sole trader owns his own business and is personally liable for all its debts. Liability is unlimited: the trader may lose all his personal assets if the business is unable to pay its debts. A sole trader operating under a name other than his own must show his own name at all business premises, on office stationery and on invoices. He must also include on stationery and invoices an address in the UK where documents relating to the business can be served.

Because there are few statutory rules affecting sole traders, this type of arrangement is best suited to small operations, particularly in service industries. Sole traders need to prepare accounts for the value added tax and income tax authorities but these accounts do not have to follow any particular format and do not need to be audited or made available to the public.

Partnership

A partnership is two or more persons carrying on a business together with a view to a profit. A partnership is not a separate legal entity under English law. Partners are individually and collectively liable for the debts of the partnership business. A creditor can sue all or any one of the partners for the recovery of a debt.

It is usual but not obligatory to have a written partnership agreement because in the absence of such an agreement, the legislation governing partnerships is very limited and often unsatisfactory. As with sole traders where a partnership does not trade under the names of its partners, there must be displayed at its business address and shown on all business correspondence the name of each partner and an address in the UK for the service of documents. The accounts of a partnership are private. Many professions are partnerships as are many small family businesses.

Limited liability partnership (LLP)

This is a new business vehicle made possible in 2001. An LLP is a hybrid corporate business structure giving the advantage of limited liability whilst at the same time allowing the members to organise themselves internally as a partnership. In contrast to a traditional partnership, the LLP is a separate legal entity. It will itself be liable for the full extent of its liabilities. An existing partnership can convert to an LLP.

An LLP must register with Companies House. It must file accounts (displaying the profits received by the highest paid partner) and an annual return and notify any changes in the LLP's membership or in their members, names and addresses and any change to the Registered Office address.

An LLP is tax transparent. Its members will be taxed on their share of the LLP's profits and gains in the same way as partners in a partnership are taxed.

Limited company

Most businesses wishing to establish in the UK will form a UK company limited by shares, usually as a subsidiary of the overseas company. A company can be public or private. There are four main advantages of using a limited company. First, the liability of shareholders (the owners of the company) is limited to any amount which they still have to pay in respect of the nominal value of their shares. If no amount remains unpaid on the shares, shareholders incur no liability for the trading debts of a limited company. Second, the company is a legal person in its own right and can carry out most acts in its own right. Third, it is quick and cheap to incorporate a limited company. Finally, a limited company trading actively is an effective way of protecting a name. The main disadvantage is publicity, as all limited companies must register with Companies House and all documents filed at Companies House are open to inspection.

Are there any other types of business structure?
 Joint venture: if you want to go into business with a company already established in the UK to take advantage of its knowledge of the local market, you may wish to consider entering into a joint venture arrangement. The most common form of joint venture vehicle is a limited company.

Agency: alternatively you may wish to appoint an agent in the UK. The agent will often have the authority to enter into agreements on behalf of the overseas company. It is usual to have an express contract between the overseas company and the agent setting out the terms of their relationship. However the parties must also comply with the Commercial Agents Regulations, which cover such matters as the remuneration of agents and the compensation to be paid to them if the agency contract is terminated.

There are also other forms of contractual arrangement such as a licensing, distributorship or supplier agreement.

How can I protect myself when purchasing a business?
 The principle of buyer beware ("caveat emptor") applies to any purchase of a business. It is up to you to ensure that the business is worth buying. Therefore you must thoroughly investigate the company and its affairs. The purchase agreement should also contain sufficient warranty and indemnity protection which will elicit further information about the company as well as providing some remedy if the seller does not disclose matters that are material.