Company Formation

What is  Company Formation?

Company formation is the process of incorporating (registering) a business in the form of a limited company. When a company is registered, it becomes a separate legal entity; a ‘person’ that is completely distinct from its owners and responsible for its own finances, assets, and liabilities.

If the company becomes insolvent, the owners (shareholders or guarantors) are not held personally liable for any of its debts or liability claims beyond the sums they have invested in shares or committed to pay in guarantees (except in rare cases, such as fraud). This financial protection is known as ‘limited liability’.

Sole traders do not enjoy the financial protection of limited liability. There is no distinction between their business finances and personal finances. This means they have unlimited liability and are wholly responsible for all business debts and claims.

Once incorporated, companies must adhere to strict accounting practices and reporting requirements under the Companies Act 2006. All corporate details are placed on public record to ensure full disclosure and transparency for the benefit of the public. is one of the foremost reasons for setting up a limited company rather than running a business as a sole trader.