Company formation is the process of registering a business as a limited company at Companies House. As a result, the business becomes a distinct legal entity. The process is also referred to as ‘company incorporation’ and ‘company registration’.

When you incorporate a limited company, it becomes an individual ‘person’ in the eyes of the law. Incorporated businesses are completely separate from their owners in terms of finances, liabilities, contractual agreements, and ownership of property and assets. Such a view is not afforded to unincorporated businesses like sole traders as distinct legal entities.

The law does not view unincorporated businesses like sole traders as distinct legal entities. Therefore, there is no separation between a sole trader business and its owner in terms of finances, assets and liabilities.