Many foreign companies have explored joining the UK market since it is one of the most business-friendly environments in the world. If you want to extend your business into the United Kingdom, one option is to set up a UK subsidiary.
What is a Subsidiary company?
Subsidiary Company or a Daughter Company, which they are sometimes called, is a company that has branched off and is controlled
by another Main Company or “Parent Company”. The term Sister Company happens when two Subsidiary companies are from the same Holding Company. If the parent company is in another country that is not the UK, once you bring your Subsidiary company here to thrive, there are UK laws and legislations you will need to follow before you can open your company up to the public and or previous clients.
Once you have laid the foundations and got a good reputation with your Main (Holding) company, this is where you may want to start a Subsidiary company. There are a lot of steps that need to be taken and professional advice and help to be had before your subsidiary company will be
fully up and running, without these steps and help it can be extremely time-consuming and costly.
Below is Everything you need to know to set this up and get the progress started:
● Statement of Capital
● Verify your Standard Industrial Classification of Economic Activities (SIC)
● VAT & PAYE
● Subsidiary Laws
First things first, once you have decided that setting up a Subsidiary business is something you would like to do, you need to find a name for the company. It will need to be different from your Main companies domain name, it can be completely different, however, to make it known that this company comes from your Parent company. A name similar would be a good business tool to gain loyal clients from your Main business. You
will need to make sure you have the rights to this name and that another company is not called the same thing.
You will need to find a registered address when setting up a subsidiary company. You will need to find out if it is more beneficial for you to have it close to your parent company or further away to broaden your client base. Make sure the address you have is easy to find and accessible to your clients and employees. It will also need to be on a budget and have the capacity you need to set up this subsidiary company. For example, is the Warehouse big enough for your products or the office area suitable for your employees.
Statement of Capital
The subsidiary’s capital statements are prepared in the same way as the parent company’s. Consolidated balance sheets, on the other hand, are prepared. This is a set of financial statements that include the main firm as well as all of its subsidiaries. Consolidated financial statements provide an overview of how well the entire firm is managed and are helpful in determining the company’s overall value. When your company moves from Unlimited to limited by starting up a subsidiary company, you will need to complete a statement of capital (this was known once as the annual return form). This form will officially give details of your status at an official date and the company’s issued shares. The points you must enclose within the document are;
– The nominal value of shares
– Amounts paid or to be paid on each share
– The total number of issued shares with the company
– The rights that are attached to each issued share
– Confirm the currency the share is held in
Verify our Standard Industrial Classification of Economic Activities (SIC)
The Standard Industria Classification (SIC) codes are four-digit numerical designations provided by the UK government that define and organise industries based on their economic activity. Under this Legislation you need to identify what your company does/ what it is selling etc. You will need to fill this out and make sure you declare this through the government form by informing them the nature of your business. It will have different types of products condensed into individual codes to make it easier to find your product and keep them updated with what your company is doing.
VAT & PAYE
If your services and goods were over £85,000 from the previous year, you will need to register for a VAT, which will then be mandatory, this is known as a VAT Threshold. It is usually quarterly that your business will be submitting a VAT return as the turnover from £85,000 is likely to increase. PAYE tax or Pay as you earn needs to also be registered. This TAX contributes to national insurance through (HMRC). This TAX is due to be paid from your employees as well as your own earnings within the company. PAYE will also be paid from non-UK employees, so this needs to be taken into account if your Subsidiary company has these overseas national employees within the company. If you have given your employees benefits, such as a company car or housing etc, the PAYE must also be accounted for with those benefits. The return from these benefits must be made annually.
UK Subsidiary Laws
Like with setting up your Main/ Parent company there were various laws you had to follow to make sure your company was running smoothly and everything was done within the UK laws. These laws must also be followed and not changed for your Subsidiary company. As spoken about above one of the laws is to make sure you are taking the money out of your employees paychecks needed for PAYE and National Insurance Contribution. When making your UK profits, you will need to pay corporate taxes. This will need to be paid monthly, unless your company grows and sells a lot more, then a quarterly payment will be needed instead. It is a legal obligation in the UK to draft up an employment contract, this has to be given to your employees within 2 months of their start date.
Some Other Laws Will Fall Under;
Are you ready?
Setting up a Subsidiary company is a big commitment, it can take up a lot of time, money and resources. So you need to make sure your parent company is settled and ready for you to move your time and energy onto another one. However it can be very beneficial for growing your company, in most cases the Main company will have control over what the subsidiary companies behavior is. Litigation or compensation issues will go to your main company, giving you less liability by making sure everything is running smoothly. The more Subsidiary companies your parent company has the more independence and freedom you have, this gives the companies their own voice, culture, brand and management.
If you have used concierge companies such as The One World to promote your original/ parent company. The One World again would be a fantastic tool to help your subsidiary company grow and gain traction within your already booming client base. We specialise in introducing foreign companies to the United Kingdom. We can certainly assist you in smoothly establishing a subsidiary in the United Kingdom and ensuring that everything is right and meets the needs of authorities and regulators, as well as assisting you with any tax and accounting concerns. With an outsourcing company like The One World, you can take back your money and time to concentrate on your Holding company, leaving the process in loyal capable hands.