Company formation is a lengthy process. The entire company forming cycle can be divided into four phases:
- Promotion stage,
- Incorporation or registration stage,
- Capital subscription stage,
- Commencement of business stage.
Stage 1. Promotion stage - Promotion is the first step in company formation. The term 'promotion' refers to the sum of activities intended to create an organisation for a business to run. This involves the logical analysis of a company idea for its profitability. Promotion starts with the development of the idea of running a business.
Stage 2. Incorporation or registration stage - Incorporation or registration is the second stage of the company formation. Registration refers to the establishment of a company. A business is legally incorporated only if it is registered with the Companies House, and the Registrar of Companies has obtained a Certificate of Incorporation.
Stage 3. Capital subscription stage - A private limited company or a public limited company, which does not have share capital may start business immediately after incorporation. 'Capital subscription stage' and 'business start stage' are only applicable in the case of a public limited company that has a share capital. Such an organisation should go through these two additional stages before it can start operation.
Stage 4. Commencement of business stage - A private company can start its business after obtaining the certificate of incorporation. A public company can start its business after getting a 'business start-up certificate'.