Reviewing company incorporations

Reviewing company incorporations

The second quarter of 2020 saw a sharp increase in the number of incorporated companies on the UK register. As with all statistics it is important to understand the reason behind the numbers in order to accurately interpret the trend. That is particularly the case in 2020 when Covid has had such an impact across business and society.

And we don’t have to look too far to see the Covid influence on the Companies House register. Thanks to a combination of easements announced by Companies House and legislation passed by the Government in order to protect companies during lockdown, the second quarter of this year saw just 14,606 company dissolutions. That’s some 89% down on the same period last year and therefore a prime contributor to the rise in register numbers.

Given the impact of lockdown on the business sector the expectation might have been that company incorporations would also have fallen. Interestingly, the quarter saw a 3.6% increase in incorporations with 176,115 new companies coming into being. This not only goes against the trend in which Q1 incorporations normally top those in Q2, it also marks the largest year-on-year quarterly rise since 2012. Here again the Covid influence can be seen with numbers of new incorporations falling year-on-year by 29.3% in April only to rise by 47.6% year-on-year in June.

Whether this rise is as a result of people having lost their jobs or having had a rethink as a result Covid, or some other reason we will have to wait and see. In the meantime, here are three top tips for those considering setting up in business for the first time:

  1. Have a clear business plan. It’s one thing to have a great idea, quite another to research and fully document how you’re going to translate that idea into a viable business. Business plans aren’t just there to satisfy the banks or other lenders; the act of planning should not only clarify ideas but also highlight weaknesses and potential development points.
  2. Choose a corporate vehicle which best matches your business model. Do you go down the sole trader route or, for example, would a private limited company or limited liability partnership be more beneficial?
  3. Don’t neglect your legal and financial obligations. Starting a new business is a very action packed and exciting time but it is important not to get so carried away with the day-to-day that you lose sight of key milestones including the preparation and submission of annual returns. This applies even if you are an existing business which is in the process of setting up a new subsidiary company; it can be too easy to work on the existing company timetable and miss those steps which may be required to align the new subsidiary with the main company reporting timetable.
Alison Griffiths
alison@gerranium.co.uk
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