What are the advantages of new company registration in the UK instead of purchasing a ready-made company?

For many years buying a shelf company in the UK has been an opportunity to start a company within the shortest possible period. Just a few years ago company registration by a non-resident took some time and effort, as it required to have a lot of paperwork done for setting up a company in the UK. Those who wanted to start a company quickly preferred to buy a shelf or dormant company from a trusted agent. In addition, it was cheaper to buy a ready-made company. However, with the simplification of company registration in the UK it is now much easier to start a new one. In the UK it takes as little as a few days to register a new company without necessity to visit the country. All procedures are done remotely and founders of such companies can get a tailored-made solution for their business.

For many years clients preferred to buy a shelf company. A shelf company provided evident benefits, such as:

  • A shelf company already has a bank account opened;
  • It usually comes with the VAT number already obtained for such company;
  • It was a cheap and fast solution;
  • It required less documents from new owners.

A decade ago it was timesaving as it only required to change previous shareholders with the new ones. In the meantime, it created some risks as a shelf company belonged to someone else and in rare cases it could have a previous history of trading. Of course, it is required to deliberately check such companies in order to exclude any debts, court actions or other risks.

Apart from the risks connected with a previous history of a ready-made company, in certain cases it was necessary to buy a company and in parallel change corporate details. For example, a new owner wanted to use another company name or appoint a specific director. So, in any case agents had to change corporate documents which is almost the same as registration of a new company. 

Though traditionally a shelf company has a bank account, currently the AML and KYC regulations require that a company goes through a KYC procedure in the bank again due to a change of a ultimate beneficial owners or new shareholders or new directors. Nowadays, banks are required to review personal and corporate documents as part of KYC checks to verify and identify individuals. In practice it takes almost the same amount of time and is as complex as opening a bank account for a new company. 

However, with the creation of a new company owners receive tailor-made solutions in connection with a unique trade name, corporate documents and auditors as well as nominal shareholders and nominal directors. Governments all over the world try to simplify company registration procedure in order to give access to more businessmen. Buying a vintage company gives no opportunities in comparison to forming a new one. Nowadays, starting a new company is cheaper and faster when buying a dormant entity.

Nevertheless, in certain cases an option to buy a shelf company is better:

  • With a shelf company it is easier to gain confidence among partners and creditors as a dormant company has been established for a few years;
  • A shelf company in the UK may already have an opened bank account which enables it to save some time, though modern banks can offer straightforward solutions for new companies registered in the UK.

That said, in most cases it is advantageous to start a new company that is specifically made for your own business purposes. With any business, it is essential to choose a unique corporate name that could become a trade name and trademark of the company. It is possible to choose your own trusted directors and secretary. There is an option to choose a registered address in a preferred location. You do not need to be worried about its previous history as this company is made specifically for you. 

If you have any additional questions, please feel free to contact us, we would be happy to assist you.

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