Buying a company name before starting up
Buying a great company name isn’t everything but when it comes to the success of your business make no mistake, it counts for a lot
It will be the way customers find and identify you, so if you have a great name in mind it’s worth protecting it – even if you aren’t ready to start trading yet.
You might think of buying a company name, but really what you’ll be doing is creating a dormant company – that is a company which is legally registered with Companies House, but doesn’t trade or have any business transactions. As long as you maintain it, no one else can set up a company in your space or sector with the same name.
This is a well-established and accepted practice, but it does come with certain annual responsibilities, and there are definitely a few pitfalls to avoid when buying a company name. So here’s a handy guide to steer you through and make sure the process is smooth sailing.
Creating a dormant company
In short, what you need to do to keep a company name for yourself is to incorporate a limited company at Companies House. Buying a company name is actually a really easy process. It used to be that you’d pay a formation agent up to £300 to take this on, but you can complete the process yourself online in well under an hour, even if you’re a first-timer. It can all be processed in as little as 24 hours and all it will cost is the £12 fee.
You could also set up a Limited Liability Partnership, but in all honesty, this is far from the easiest way of doing things and is only something you’d take on in extremely limited circumstances when you’re not actually allowed to set up a limited company – for example, if you want to establish a firm of solicitors.
To set up a limited company will need to name at least one director and one shareholder – but that can be the same person. And you will need to identify any persons of significant control. The company will be marked active for the first year. You’ll need to remember that from the 12-month anniversary of the day the company was formed you will then have two weeks to submit a confirmation statement – this is when you will be able to confirm that the company is dormant.
Where do you want to register your company?
Take a minute to think about whether or not you want to use a home address for your company’s registered office – this information will be in the public domain and will stay there indefinitely. You may prefer to opt for a virtual office address or your accountant’s address. Some accountants offer a “dormant only” service for a small annual fee, which allows you to register the dormant company at their address and they will handle the annual filing too.
Confirmation statements and annual accounts
You will have two key documents you’ll need to submit to Companies House going forwards.
►An annual confirmation statement
This will need to be submitted on the annual incorporation date, confirming all the details of the company such as the registered office, names of directors, shareholders, and so on. It is a straightforward online form, with a filing fee of £13 each year.
These are due for the first time 22 months after the date of incorporation, then nine months after the “year-end” every year after that. The year-end for your company will automatically default to the end of the month in which the company was first incorporated. For your annual accounts, you will need to submit a full accounts balance sheet, even if it’s just to detail £1 in the bank or one £1 share.
It’s all too easy to lose track of dates or let a dormant company slip to the back of your mind, so be aware that you fail to submit your accounts on time you will get fined to the tune of £150, even if you’re just a day late, to £750 if you’re more than three months late.
Do I need to file a corporate tax return with HMRC?
A new limited company that hasn’t started trading is considered dormant for corporation tax. While Companies House and HMRC are totally separate bodies, they are supposed to communicate – but that doesn’t always happen as it should, so take action to make sure HMRC is on the same page.
After registering with Companies House, make sure you lookout for the CT41(G) Form which will be sent by HMRC to your registered office, and follow its instructions to notify HMRC that your company is dormant. The same form will be issued every three to four years by HMRC to obtain up to date details of the company, but if the company does begin to trade in the future it will be necessary to notify HMRC within three months of the start of trading.
Even after notifying HMRC, it is still possible to come unstuck if you mistakenly submit abbreviated accounts rather than dormant accounts to Companies House. Abbreviated accounts signify that your company is active and trading – and if you file these HMRC will come knocking asking for corporation tax, and you could get slapped with a £100 fine for failing to submit your corporation tax return, even if you’re not actually trading.
If the company does begin to trade in the future it will be necessary to notify HMRC within three months of the commencement of trading.
Don’t forget the domain name
If you want to protect a company name at the same time as incorporating a dormant company, it makes sense to also purchase the domain name to go with it. The last thing you want is to get to the point when you want to start trading – and find that the URL you wanted is taken, or worse still, being use by a competitor. These days a company and its website are virtually synonymous, so get both sorted at the same time.
Sean Toomer is managing director and founder of Diverso Accountants