Company Formation: Everything You Need to Know

• December 4, 2024
• Alejandro Postigo
• no comments

Company formation is a crucial step in the process of formalising a business. Whether you are starting your own project or looking to transform your economic activity into a legally recognised entity, understanding the key aspects of company formation is essential. At MJ Consulting, we explain how to properly set up a company, the most common types of companies, and the consultancy services that can help you make the best decisions.

What is company formation?

Company formation is the legal act by which a business entity is created to carry out commercial or economic activities. This process involves defining the business’s legal structure, the rights and obligations of the partners, and establishing how the company will operate under local laws.

Through this process, the partners or shareholders create a distinct legal personality from the individuals that comprise it. This provides benefits such as limited liability, the ability to enter into contracts, and the ability to open bank accounts in the name of the company.

Key Steps in Forming a Company

Company formation involves a series of legal and administrative steps. Although these may vary depending on the type of company and jurisdiction, the most common steps are as follows:

• Choosing the type of company. The first step is to decide what type of company you wish to form. The most common options include:
  • Limited Company (Ltd). Ideal for small and medium businesses, where liability is limited to the capital invested.
  • Public Limited Company (PLC). Suitable for larger companies with many shareholders. Shareholders’ liability is limited to their contribution.
  • Partnership. For businesses run by two or more individuals who share profits and losses.
  • Cooperative. A business model focused on collaboration and shared ownership.
• Drafting the Articles of Association. The Articles of Association are the internal rules that will govern the relationship between the company’s shareholders. This document outlines the rights, duties, and the internal organisation of the company.
• Capital contribution. Shareholders must make a capital contribution to the company, which can be in the form of cash, assets, or rights.
• Notary deed. After the Articles are drafted and capital contributions are defined, the deed of formation must be signed before a notary. This step formalises the creation of the company.
• Company Registration. Once the deed has been signed, the company must be registered with the Companies House (or the relevant registration body). This step grants the company its legal personality and allows it to operate legally.
• Obtaining a Tax Identification Number (TIN). The TIN is necessary for any financial or tax-related activities.

Benefits of Forming a Company

Before forming a company, it’s important to consider the following aspects:

• Choosing the right company type. The type of company you choose should align with your business goals and needs. Expert consultancy can help guide this decision.
• Initial and ongoing costs. There are costs associated with both forming and maintaining a company, such as notary fees, registration fees, taxes, and other obligations. It’s important to plan for these expenses.
• Taxation. Companies are subject to specific taxation based on their type and activities. Understanding your tax obligations and seeking professional advice can help optimise your business’s tax position.
• Shareholder and management structure. Clearly defining how profits will be distributed, how important decisions will be made, and who will have authority within the company is critical to prevent future conflicts.

How Can We Help You with Company Formation?

At MJ Consulting, we offer specialised services in company formation. Our team of experts will assist you throughout the entire process, ensuring that you comply with all legal and tax requirements and that the company structure you choose is the most suitable for your business needs.

Our services include:

• Advice on choosing the right company type.
• Drafting the Articles of Association.
• Handling notarial deeds and paperwork.
• Company registration and obtaining the TIN.
• Ongoing tax and financial advice.

Forming a company is a crucial step in formalising a business and unlocking new opportunities. Although the process may seem complex, the right guidance can simplify it and ensure you meet all legal and tax obligations.

If you would like more information or have any questions, please don’t hesitate to contact us. We invite you to follow us on our social media.