An incorporated company is recognised by the law as having a personality which is distinct from the separate personalities of the members of the company.

When a sole trader, or an individual running a business as a partner in a partnership, decides to incorporate that business, the individual transfers the assets of that business to a (generally speaking) newly formed company. Such a transfer could be a taxable event for the purposes of VAT, CGT, income tax, stamp duty land tax and capital allowances and could give rise to a tax charge on the transferor or the transferee. There are, however, a number of reliefs and elections available which can reduce, eliminate or defer those tax charges on incorporation, including: • an incorporation relief from CGT on chargeable gains which defers the whole or part of the gain made on the disposal of the capital assets • a relief from CGT which reduces the rate of tax on the gain made on the disposal of the capital assets (business asset disposal relief (BADR), formerly known as entrepreneurs’ relief) • a gift relief from CGT which defers the gain made on the disposal of the capital assets • a stock value election

When a sole trader (or an individual running a business as a partner in a partnership) decides to incorporate that business, he transfers the assets of that business to a (generally speaking) newly formed company. Such a transfer would constitute a transfer, disposal or supply for the purposes of VAT, capital gains tax, income tax, stamp duty land tax (SDLT) and capital allowances and could give rise to a tax charge on the individual making the transfer. There are, however, a number of reliefs and elections available that can reduce, eliminate or defer those tax charges on incorporation, including: • an incorporation relief for capital gains that defers the whole or part of the gain made on the disposal of the capital assets • a relief for capital gains which reduces the rate of tax on the gain made on the disposal of the capital assets (business asset disposal relief, formerly known as entrepreneurs’ relief) • a gift relief for capital gains that defers the gain made on the disposal

What is a company? A company is a separate legal entity, distinct from its members. It is owned by its members and it is managed by its directors. It is regulated by the Companies Act 2006 (CA 2006). The company is a very commonly used business vehicle; there are over 5 million registered companies in the UK. The following types of company are available under the CA 2006: • public or private companies limited by shares • private companies limited by guarantee (which are primarily used by charities and other not-for-profit organisations—see Practice Note: Companies limited by guarantee), and • unlimited companies (which are relatively rare—see Practice Note: Unlimited companies) This Practice Note covers the incorporation of a public or private company limited by shares, which are the most common types of company. Why incorporate a company? One of the key reasons for choosing to incorporate a company as a form of business vehicle (as opposed to a sole trader, a partnership or another form of business vehicle) is that it is a separate legal entity which

View or print a full-size PDF versio

This Practice Note explores the key considerations and steps to be taken when setting up a company limited by shares or guarantee. What is a company? A company is a business vehicle which is a separate legal entity, distinct from its members. It is owned by its members and it is managed by its directors. It is regulated by the Companies Act 2006 (CA 2006). The company is a very commonly used business vehicle; there are over 5 million registered companies in the UK on the public register administered by Companies House. The following types of company are available under the CA 2006: • public or private companies limited by shares—see Practice Notes: Private companies limited by shares and Public companies limited by shares • private companies limited by guarantee (which are primarily used by charities and other not-for-profit organisations—see Practice Note: Companies limited by guarantee), and • unlimited companies (which are relatively rare—see Practice Note: Unlimited companies) For information on the many other types of business vehicle see Practice Note: Forms of business vehicle—fundamentals. See

For full details on the incorporation of a private company limited by guarantee, see Practice Note: Companies limited by guarantee. Matter to be considered or step to be taken Companies Act 2006 (CA 2006) reference (if applicable) Tick box when step complete or matter considered Preparing to incorporate a private company limited by guarantee Will the company be tailor-made on incorporation or purchased 'off the shelf'? If the company is to be tailor-made, proceed with the rest of this checklist. N/A Who are the initial members? There

For full details on the incorporation of a private company limited by shares, see Practice Note: Incorporating a company. Matter to be considered or step to be taken Companies Act 2006 (CA 2006) reference (if applicable) Tick box when step complete or matter considered Preparing to incorporate a private company limited by shares Will the company be tailor-made on incorporation or purchased 'off the shelf'? If the company is to be 'tailor made', proceed with the rest of the considerations and steps within this

For full details on the incorporation of a public company limited by shares, see Practice Note: Incorporating a company. Matter to be considered or step to be taken Companies Act 2006 (CA 2006) reference (if applicable) Tick box when step complete or matter considered Preparing to incorporate a public company limited by shares Will the company be tailor-made on incorporation or purchased 'off the shelf'? If the company is to be 'tailor made', proceed with the rest of the considerations and steps within this checklist. See further: Tailoring a shelf company limited by shares—checklist. N/A Who are the initial shareholders (also known as subscribers)? There may be just one subscribing

Commercial analysis: There are often good reasons for incorporating terms from one contract into another but consideration needs to be given to how the incorporated terms will apply in practice.

Incorporation is the process by which a business or other organisation is formed into a separate legal person, typically by registration at Companies House (England & Wales, Scotland, Northern Ireland) or the Companies Registration Office (Ireland). Once incorporated, the company or other body gains legal personality distinct from its members, enabling it to own assets, incur liabilities, enter contracts and sue or be sued in its own name, with limited liability for shareholders or members in most structures. The concept is primarily statutory, governed by the Companies Act 2006 in the UK and the Companies Act 2014 in Ireland, though “incorporation” is also used descriptively in other contexts, such as incorporation of charities, LLPs, industrial and provident societies and incorporated associations. Across England & Wales, Scotland, Northern Ireland and Ireland, usage is broadly consistent, referring to the act and legal effect of bringing an entity into existence through registration and compliance with constitutional and filing requirements. Incorporation is central to corporate governance, corporate finance, tax planning, risk management and transactional practice, including M&A, restructuring and group reorganisations.

This Practice Note considers the incorporation of arbitration agreements into contracts under English and Welsh law (England and English are used as shorthand throughout). Related content on arbitration agreements can be found on the right-hand side of the page, including Practice Note: Arbitration agreements—the in writing requirement Note that an oral agreement does not, however, have the effect of depriving a party of access to the courts because either party is free to revoke the authority of their appointed arbitrator under such an agreement. For an arbitration agreement to be effective, it must be properly incorporated into the contract to which it relates. Section 6(2) of the Arbitration Act 1996 (AA 1996) requires that the 'reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the contract'. As such, an arbitration agreement must be in written form contained within: • a clause forming part of the contract, or