You are incorporating, and almost certainly for one reason above the others: a wall between your own money and the business’s. That reason is sound and the wall is real. Here is the half nobody mentions while you are deciding. The protection you are buying is the protection you will shortly be asked to give back — by the bank opening your account, the landlord taking a new company as tenant, the first supplier extending credit, the firm leasing you equipment. Each of them looks at a company with no history and wants a human being behind it, and a personal guarantee is the instrument that produces one. Nobody else cuts the door. You fit it, by hand, in writing, usually inside three months. And you will probably not notice, because of what it is called when it is handed over: a formality, standard for new companies, just the directors signing. The word guarantee very often never appears in the conversation at all. Three things follow that founders learn late. It outlives the role — a guarantee follows your signature rather than your office, so resigning releases nothing without a written release from whoever holds it. Signed jointly, it may expose each of you to the whole, and a lender approaches whoever is easiest to reach rather than apportioning between founders. And people outside the company end up inside the obligation — a spouse as co-obligant, a parent’s property as security, somebody holding no shares and taking no profit. Last, the part that puts it in proportion. Everywhere you have not guaranteed anything, the wall is intact, and that is most of what a business does. So the answer is not fear of signing; it is counting what you have signed. Keep a register of guarantees from day one. Our boundary: the incorporation file is what we build and verify. Guarantees we will not advise on, negotiate, arrange, witness or read for you.
What this guide covers
Ask any founder why they are doing this and the answer comes back in some version of the same sentence, usually after a bad year.
So that what happens to the business does not happen to the house.
It is worth noticing that this is not how most people describe other registrations they obtain. Nobody takes a trade licence for protection. Nobody incorporates a partnership to sleep better. This one is bought almost entirely for what it keeps away from you rather than for what it lets you do, which is unusual enough to be worth holding on to as you read the rest.
Which is a fair description of what incorporation builds, and it is worth saying clearly before anything else on this page qualifies it.
The company becomes a person in its own right. Its debts are its debts, its contracts are its contracts, and the people who own it are standing on the other side of a wall from all of that. That wall is genuine and it is the main thing you are buying.
And the people describing it to you are not overselling it. A separation between a business and the people who own it is one of the genuinely useful inventions in commercial life, and it is the reason a person can try something, fail, and try again. The complaint in this page is not with the idea. It is with the fact that the sentence usually stops there.
And it is also what the entire market around incorporation leads with, in two words that do a great deal of work.
Limited liability.
Nothing wrong with the phrase. It is simply the beginning of a sentence that almost nobody finishes in front of a first-time founder.
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Set out properly, because this page is not an argument against incorporating and we do not want it read as one.
Across all four, the separation does precisely what you believed you were paying for, and those four cover the vast bulk of an ordinary trading year.
Those four lines are worth re-reading if the rest of this page starts to feel alarming. They describe ordinary weeks: an invoice disputed, a job argued about, a payment delayed, a contract gone wrong. For all of it the company stands in front of you, and that is not a technicality — it is the difference between a bad quarter and a bad decade.
So the question this page is built on is not whether the wall exists. It does.
Am I giving back the one thing I built this for?
Because the answer, for most founders, is yes — partially, voluntarily, in writing, and without noticing.
Nobody breaches the wall from outside. There is no clever argument that gets round it and no authority that sets it aside on a whim. What happens is simpler and entirely consensual.
And there is no moment at which anybody announces that the thing has happened. No letter says that your protection has been reduced, because from everybody else’s point of view nothing was reduced — a facility was granted on terms that were agreed. The reduction exists only from where you are standing, and only if you were counting.
Which means the part of this process that deserves your attention is not the part you are currently thinking about.
You are thinking about the incorporation: the name, the documents, the certificate, the fee. That part is administrative and it will go fine.
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Which is why the moment to read this is now rather than later. Once the account is open and the godown is taken, the doors are already fitted and the only remaining question is whether you know where they are. Before any of that happens, every one of the four is still a conversation you have not had yet.
The part that decides whether you keep what you came for happens afterwards, in the ordinary business of starting up.
Opening the account. Taking the premises. Agreeing terms with the first supplier. Leasing the first machine. Nothing on that list looks like a legal event, and every item on it is where the question arrives.
The timing is what makes it slip past. Incorporation is a deliberate, planned act that you spend weeks thinking about. The four requests that follow arrive mixed into the ordinary business of starting up, each on a different day, each as one item in a longer task, and none of them is the thing you have set aside that afternoon to think about.
Now the mechanism, and the image is worth holding because it is accurate.
The wall is built at incorporation. The doors are cut afterwards, one at a time, each by your own hand, each with a pen you were handed across a counter.
One more thing about the order in which these arrive, since it affects how much attention each gets. The first request lands when the business is at its most optimistic and least experienced, and the one that most deserves scrutiny is usually the first one, because everything afterwards is compared to it. A founder who examined the first properly tends to examine the rest; a founder who waved the first through has set the habit.
The first door is almost always the bank, and it arrives with the first facility rather than with the account itself.
An overdraft, a working-capital line, a term loan for equipment. A company three months old has no record anybody can look at, and the lender resolves that by asking for a person. The account opening is paperwork; the facility is where the question lives.
There is one feature of the bank request worth knowing in advance: it usually does not arrive at the same time as the account. The account opens on identity documents and resolutions, everybody is pleased, and the guarantee question surfaces weeks later when a limit is actually sanctioned. People remember opening the account as the banking event and do not connect the second conversation to the first.
The second is the premises, and founders are least prepared for this one.
A landlord asked to accept a newly formed company as tenant is being asked to rely on an entity with no history and no assets beyond a bank balance. Many respond by wanting the directors on the lease personally, or a guarantee alongside it.
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There is a tell worth learning for this one. A supplier credit application that asks for the directors’ personal addresses, identity documents or signatures in an individual capacity is usually not doing identity checks on the company. Those fields exist because somebody intends to be able to reach a person, and a form that collects them generally has a clause further down that explains why.
The third is quieter and arrives disguised as an ordinary commercial form.
Materials on thirty days is lending by another name, and a supplier lending to a young company often looks for the reassurance a bank looks for. It appears as a clause inside a vendor form rather than as a separate document, which is precisely why it is the one people sign without registering what it was.
The premises version has a second characteristic that the bank version does not: it is frequently negotiated by whoever is managing the move, under time pressure, with a deposit already paid and a fit-out booked. A request that would have been examined calmly in week one gets agreed in the week the godown has to be occupied, which is not when anybody reads a clause.
And the fourth is the machine, the vehicle or the fit-out financed rather than bought.
An equipment lease to a young company is the same risk in another shape, answered the same way. Four outsiders, four exposures, four requests — arriving over a few months and never in the same week, which is part of why they are not seen as a pattern.
A fifth that is worth watching for because it does not look like any of the four: a large customer who wants a performance guarantee, or a franchisor whose arrangement carries one in a schedule. Those arrive wrapped in a commercial agreement rather than a financing one, and the word may be buried in a clause rather than printed on a separate page.
Put together, which nobody ever does at the time.
| Who asks | What they are looking at |
|---|---|
| The bank, with the first facility | A company with no record to assess |
| The landlord, on a new tenancy | A tenant that could dissolve and leave nothing |
| The supplier, on credit terms | An unsecured exposure every thirty days |
| The lessor, on equipment | An asset in the hands of an untested business |
Each is reasonable on its own. The four together are the wall with four doors in it, and no single one of them felt like that at the time.
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Which brings us to the reason this slides past careful people, and it is a matter of language rather than of law.
The document is usually clear. The conversation around it almost never is.
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Here is what gets said instead, in our experience, almost word for word.
And none of it is said in a tone that invites a question. The exchange happens standing up, at a counter or across a desk, with somebody being helpful and slightly rushed and plainly doing this for the twentieth time that week. Asking what a document is called in that setting feels faintly rude, which is exactly the social reason it goes unasked.
And every one of those sentences is true, which is what makes them effective.
It is standard. It is for the file. It is the directors who sign. None of them is a lie and none of them tells you what you are about to do, and the person saying them is usually not concealing anything — they genuinely process twenty of these a week.
And the same holds in reverse for the rare person who does ask. We have never heard of anybody being refused an answer. The question is answered straightforwardly, usually with mild surprise, and the document goes on being signed — the difference is that it is now being signed by somebody who knows what it is.
So the practical defence is small, free and almost never deployed.
When you are handed a document to sign in your own name rather than for the company, stop and ask what it is called.
Not an argument. A question. If the answer contains the word guarantee, you have just moved from signing to deciding, and that is the entire difference this page is trying to make.
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Described at the level we are able to describe it, which is the shape rather than the content.
A guarantee is a promise made by a person, standing beside the company’s own promise and separate from it.
Two things about the shape are worth stating because they are what people get wrong in the other direction. A guarantee is not a transfer of the company’s debt to you, and it is not an admission that the company is in difficulty. It is a second, standing promise that exists from the day it is signed, in good times as much as bad, and does nothing at all unless a particular situation arises.
And that separateness is not a side effect. It is the reason the document exists at all.
The company already owes what it owes; nobody needs a second piece of paper to say so. What the holder wants is somebody else’s promise about the same thing — which is precisely the wall, with a door in it, on that one matter.
What any particular guarantee says, how far it reaches, how long it lasts and what has to happen before it bites are questions about that document. We will not read one and tell you. An advocate does that, reading the sheet you are actually holding rather than a description of sheets resembling it.
It is also worth noting what the document does for the other side beyond the money. A person who has personally promised behaves differently from a person who has not: they answer the phone, they attend the meeting, they find a way. Lenders know this, and a good part of the value of a guarantee is that it almost never has to be used.
So the thing to understand is not the clause but the purpose.
You incorporated to put the business at one remove from yourself. A guarantee is the instrument that closes that remove, for the benefit of one named person, on one named exposure. It is the exact opposite of the thing you bought, applied narrowly and on purpose.
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Which is also why it cannot simply be refused with an argument about principle. Explaining to a bank that you incorporated precisely to avoid this is a true statement and not a reason for them to change the price. They know why you incorporated. The separation is visible to them too, and the guarantee is how they are dealing with it.
And this is where founders often go wrong emotionally, which costs them the negotiation.
The request is not an insult, a trick, or evidence that somebody doubts you personally. It is arithmetic. Reading it as a slight produces either resentful compliance or a pointless argument, and neither of those is the useful response.
It also explains why the request tends to fade as the company ages. Two or three years of filed accounts, a payment record and a visible balance sheet give the other side something to look at, and the need for a person behind the company falls away. That is worth knowing because it makes a release a realistic thing to ask for later, rather than a favour.
Because what is actually happening is pricing.
A lender facing an entity with no record has a short list of ways to handle it: charge more, lend less, take security, or get a person. Those are alternatives to each other. A guarantee is one of several prices for the same risk, which is a very different thing from a precondition.
Seen that way, one thing becomes obvious that founders often miss: the alternatives are worth asking about even if you end up signing anyway. A smaller facility, a shorter term, more security over a company asset, a higher rate — whether any of those is on the table is a question, and the answer costs nothing to obtain. The worst outcome is signing without having asked.
Which has a consequence worth sitting with.
If a guarantee is a term, then it is in the same family as the rate, the limit and the security — and terms are discussed. What is available to you depends entirely on the lender, the facility and the business, and we will not tell you what to ask for, because that is advice about your own exposure.
So the reframing, which is the whole practical content of this part of the page.
Treat each guarantee as a decision taken on that occasion, not as a signature completing a file.
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And then the second half of the same discipline, which is about records rather than decisions: whatever you sign, take a copy away with you. Not a photograph of the signature page. The whole document, as signed, kept where you can find it. A surprising number of founders have given guarantees they have never read in full and cannot now produce.
And the decision has one question in it, which can be asked in your own head in ten seconds.
What is the company getting today, in exchange for this?
Sometimes the answer is obvious and good: the overdraft that lets you take the order, the premises you cannot trade without.
Sometimes it is thin: a supplier wanting a guarantee for terms you could manage without, a facility larger than the business needs. The point is not that the answer should be no. It is that there should be an answer, and in the files that go badly nobody could remember what the fourth one had been for.
Now the feature that catches people years later, long after everybody has stopped thinking about any of this.
A guarantee does not expire because your relationship with the company did.
It helps to see why that is logical rather than unfair. The person holding the guarantee gave something up — money, premises, goods — partly because you promised. If your promise could be ended by a decision taken inside the company you were leaving, it would not be worth having. The durability that is inconvenient to you is what made it acceptable to them.
Which is the opposite of what the paperwork of leaving suggests.
You resign, a resolution records it, filings are made, the registers are updated, your shares are transferred, and every document of the exit is in order. None of that touches a promise you made personally to somebody who is not the company.
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Because the holder of a guarantee was never dealing with your office.
A guarantee attaches to the person who signed it, not to the position that person happened to hold.
A related trap sits in the opposite direction, for whoever remains. A founder who stays can find themselves carrying guarantees for borrowing taken when there were three of them in the business and two have since gone. Nothing changed on the paper; the number of people standing behind it simply fell, and nobody re-papered anything.
So the company changing hands, changing directors or changing its mind about you is not an event in that document’s life.
It has one party on each side and you are one of them. The other side has no particular reason to notice that you left, and in many cases genuinely does not.
The same point applies to a company that is sold rather than left. New owners, new directors, a clean share transfer and a handover of everything — and a guarantee given by the previous founder sits exactly where it was, because the holder was never a party to the sale. Buyers and sellers both assume this is dealt with somewhere in the transaction documents, and it is only dealt with if somebody specifically deals with it.
The pattern is consistent enough to describe without naming anybody.
Somebody exits a company on reasonable terms. Their shares go, their directorship goes, the handover is tidy. They move on, start something else, and stop thinking about a business they no longer own.
And some years afterwards a letter arrives about a facility of a company they have nothing to do with.
They are not confused about whether they signed; they are confused about why it still exists, and the answer is that nobody ever released them and they never asked. The business may have gone on perfectly well for years in between, which is why the letter is so unexpected.
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There is an intermediate position worth knowing about, since a full release is not always available: a replacement. Where somebody is stepping into the role you are leaving, the holder may be willing to take their guarantee in place of yours. Whether that is offered depends entirely on them and on the incoming person, and it is a conversation to open at the exit rather than afterwards.
Which makes the exit checklist one item longer than anybody writes it.
Not the passage of time. Not the facility being repaid as far as you know. Not an understanding at the meeting. Not the new directors taking over everything.
Where the facility simply ends rather than transfers, say so explicitly when you ask. A guarantee supporting a loan that has been fully repaid is the easiest release anybody will ever give you, and it is also the one nobody bothers to collect, because the repayment feels like the end of the matter. Collect the paper anyway.
A release comes from whoever holds the guarantee, in writing, and you keep the writing.
Ask for it at the moment of exit and chase it that week. Everybody’s willingness to deal with this is highest while the exit is being arranged and falls steadily afterwards — and the person with the least leverage to obtain it is the person who has already left.
Where a facility is being closed rather than transferred, the closure documentation is the natural moment to ask what happens to any guarantee that supported it.
Now the dimension that only applies when there are two or more of you, and it is the one founders find most surprising.
Two founders sign the same guarantee. Both assume it halves. That is not usually how it works.
Which means the arithmetic founders do in their heads is wrong in a specific direction. Two founders, one obligation, each believing they carry half, between them believe they carry the whole — and each may in fact carry the whole, so the total exposure in the room is double what either of them has pictured. Nobody is deceived; the picture is simply never drawn.
What yours says is a question for whoever reads the document, and we will not tell you.
What we will tell you is the pattern we see. Each signature is frequently exposed to the whole rather than to a share, which means you did not guarantee your half — you guaranteed the obligation, and so did they.
And the one who is approached is usually the one who can least argue that it is somebody else’s problem. Being contactable, being in the same city, having a traceable address or a visible job is what decides it. None of those has anything to do with who ran the company, who took the money, or who benefited, which is what makes the outcome feel so arbitrary afterwards.
Which matters because of how the holder behaves rather than how the founders feel.
Nobody apportions politely between two people. The approach goes to whoever is present, contactable and solvent — and that may be the founder who stayed, the founder who left, or the one with a traceable address, for reasons that have nothing to do with who ran the business.
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And the founder who left has a particular problem here. They are no longer in the business, so they hear nothing about how it is going, cannot influence any decision, and will not know if risk is rising. Their exposure is unchanged and their information has gone to zero, which is the worst combination of the two available positions.
Now the part of this subject we raise unprompted, because it reaches somebody who never chose any of it.
A lender wants more than the two founders. A second person is asked to sign, or a property is offered as security, and that person is a wife, a husband, a parent, occasionally a sibling.
And the property route is the commoner of the two, which makes it easier to overlook.
A house in a parent’s name, a flat held jointly, a plot nobody was using. Offering it as security brings its owner into the arrangement whether or not they sign anything called a guarantee, and the owner frequently understands the transaction as helping with paperwork.
The language used with family is softer still than the language used with founders. It is helping with the paperwork, it is only because the bank needs a second name, it is a formality because the property is in your name. Nobody sits a parent down and explains what is being created, partly because the founder asking has not fully framed it that way themselves.
Set out plainly, because this is the asymmetry worth naming.
| What they have | What they carry |
|---|---|
| No shares in the company | An obligation connected to it |
| No role and no vote | No say in the decisions that affect it |
| No share of the profit | A share of the exposure |
| No information about the business | No way to know when risk is rising |
So the one thing we would say to any founder in that position, and it is not legal advice.
The person being asked to sign is usually the least informed person in the room. The conversation has been running between the founders and the lender for weeks; they are handed a pen at the end of it. They should take their own advice, from somebody who is not you, and an independent consultation for them is a small cost against what they are being asked to do.
Now the correction this page owes you, because everything above has been about the exceptions and the exceptions are not the rule.
The wall is not a fiction, it has not been quietly cancelled, and you have not wasted the incorporation.
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This section matters for a practical reason as well as a reassuring one. A founder who believes the whole structure is a fiction starts behaving as though nothing is protected, which usually means taking personal responsibility for things nobody asked them to take responsibility for — settling a company dispute from their own pocket, personally promising a customer, standing behind a supplier out of embarrassment. Each of those is a door nobody even requested.
Everywhere you did not personally promise anything, the separation is intact and behaves exactly as described.
No guarantee, no door. The holder of that obligation is dealing with the company and only with the company, which is what you built it for.
And in volume, that is the overwhelming majority of a business’s year.
A wall with four doors in it remains a wall — and knowing exactly where those four are puts a founder somewhere quite other than believing, wrongly, that there are none.
There is a middle habit that costs nothing and changes the pattern: treat the fourth request differently from the first. The first guarantee, for the facility that lets the business exist, is usually an easy decision. By the fourth, the question of whether this one is worth it on its own terms is a real question, and it is the one nobody asks because by then signing has become the habit.
Which rules out the two unhelpful reactions to everything above.
Not refusing every guarantee, because a young company that refuses all four may simply have no facility, no premises and no terms. And not signing everything without looking, which is where this page started.
And the reason counting works is that the danger here was never the guarantees themselves. Businesses give guarantees and repay facilities and nothing happens, year after year. What hurts is a founder who has lost track — who cannot say what exists, cannot produce the documents, and therefore cannot plan around them or clear them when the opportunity arises.
The answer is arithmetic, and it is almost embarrassingly simple.
Know how many you have given, to whom, and for what. That is the whole discipline.
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Counting also makes the opposite move possible, which almost nobody uses. A guarantee given in year one, for a facility the company has outgrown, can be raised again when the position has changed. Nobody from the other side will suggest it. A founder who knows exactly what is outstanding is the only person in a position to ask whether it is still needed.
So the single recommendation on this page, and it costs nothing but a sheet that exists.
Start it on the day the company is incorporated, empty. Not when the first guarantee is given, because the first guarantee is always given before anybody thinks about recording them.
And keep it where the next person will find it rather than where you will. Companies change accountants, founders change laptops, and a sheet living in one person’s email is a sheet that disappears at the exact moment somebody else needs it. The point of a register is that it answers a question asked by somebody who was not there when the entries were made.
Five columns. Nothing clever.
It belongs with the statutory registers rather than in somebody’s drawer, and a single ordered company file is where it survives a change of accountant.
And read it at the four moments when it matters, each of which is a moment somebody is going to ask.
Once a year with the accounts. When a founder leaves. When a facility is refinanced or closed. And when anybody is thinking about selling the business or taking in an investor — which is when the question gets asked formally for the first time.
One more occasion worth adding to the list: whenever a facility is renewed rather than newly taken. Renewals are processed as continuations and the paperwork is lighter, which means a fresh guarantee can be signed as part of a routine annual exercise without anybody treating it as a new decision. A register makes the renewal visible as an entry rather than invisible as a repeat.
The alternative is not dramatic until the day it is.
Nothing goes wrong for years. The guarantees sit where they sit, the business trades, nobody thinks about any of it. What the register guards against is not the guarantees but the ignorance of them — two different hazards, arriving on two different days.
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The cheapest version of fixing this, if you are reading it late, is a single afternoon. Go back through the account-opening pack, the lease file, the supplier applications and the equipment paperwork, pull out anything signed in an individual name, and write the five columns from what you find. It is unpleasant and it is finite, and afterwards you can answer the question.
And the moment of discovery is almost always one of three, none of them convenient.
A buyer’s advisers asking what the founders have personally guaranteed. A new lender asking what else is outstanding. Or a letter about something nobody had thought about in four years. Being unable to answer that question is its own kind of damage, separate from whatever the guarantees actually cost.
And the discovery is worse for being discoverable. A buyer’s advisers do not ask once and move on; they ask, they are given an incomplete answer, and then they look. What they find afterwards is read as something that was withheld rather than something that was forgotten, and by then the distinction has stopped being available to you.
Our own boundary, stated precisely, given how much of this page concerns work we do not do.
Every one of those is a judgement with professional responsibility attached. Anything said by whoever put your incorporation papers together would hold no authority and would be followed regardless — and that pairing is where the damage comes from.
Court work is for your advocate, whose fee is engaged and paid by you directly; we do not quote, collect or share it
A closing table of what founders believed, taken from the ones who reached us after a letter rather than before an account was opened.
| What was believed | What was the case |
|---|---|
| Incorporating protects my house, full stop | It does, except where a guarantee was personally given |
| Nobody can get past limited liability | Nobody got past it; a door was fitted from the inside |
| That bank paper was a formality | The word for it was not used, and it was a guarantee |
| I resigned, so it ended | It followed the signature; no release was ever obtained |
| We both signed, so we split it | Each signature was commonly exposed to the whole |
| My father only helped with paperwork | His property was security, and he was inside the arrangement |
None of them amounts to carelessness. Each is a fair conclusion drawn by a person given accurate words that omitted the single thing worth knowing.
One thing this page is not saying, in case the balance has come out wrong: there is no better alternative available. Not incorporating leaves everything exposed rather than four things. The other forms carry their own versions of the same conversation. This is not an argument for staying as you are; it is an argument for knowing which four doors you fitted.
Orders for an incorporation file reach us from a handful of recognisable positions.
Number two is who this page was written for: that founder understands better than anyone what the purchase is, and has been warned least about where it quietly reverses.
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Sequenced deliberately — the opening items are what determine whether anything has to be submitted twice.
That last item takes us ten minutes and is the only thing on the list anybody has ever written to thank us for.
One rule of ours, and on this file it is the one that matters most.
We do not arrange, carry, witness, explain or obtain a personal guarantee. Not for a bank, not for a landlord, not as part of an account-opening pack we are otherwise helping with.
A document creating a personal obligation should be signed by somebody who has read it, after taking their own advice, and not as the last item in a pile handed over by a company’s agent. If we were that agent, we would be the reason it was signed without thought — which is the exact failure this whole page describes.
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Four separate parties have a hand in a new company, so here is who answers which call.
| The part | Whose it is |
|---|---|
| Any guarantee — whether, what it says, what to negotiate | An advocate’s, before the pen moves |
| Independent advice for a spouse or parent being asked to sign | Their own adviser’s, not yours and not ours |
| Whether a company suits the business at all | A chartered accountant or company secretary’s |
| Putting a membership number against the filings | The certifying professional’s |
| What is agreed between the founders about shared exposure | Yours, settled in writing with an advocate |
| Whether the file is complete, consistent and scheduled | Ours |
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And the discipline inside our own half, named rather than implied.
We do not value an exposure, estimate what a guarantee could cost, state what the separation protects, or certify that anything in your file is sufficient for anybody. In its place comes a written list of each point we think an accountant, a lender or a purchaser will pick up on.
And what we charge, put as plainly as it is put on any other page of this site.
The figure is ₹7,999, covering the build and the checking set out above, usually finished within 7 – 15 days. Nothing in it is a state charge or a certification charge, and none of it depends on registration being granted — granting is not in our hands.
State charges, any stamp duty and whatever the certifying professional bills sit outside that and go from you to them. Get their complete number in writing before engaging — the incorporation, the commencement step and a full first year of compliance together — since a quote almost always covers only the first of those three. Where the business later needs an authorised capital increase, a share transfer, an MSME registration or eventually a formal closure, every one of those runs on records kept from month one. If you have not yet settled whether this is the right form at all, that conversation belongs with your accountant alongside the single-owner, LLP, partnership and proprietorship routes rather than with us.
If the name chosen at incorporation turns out to be wrong for the business a few years on, changing it is far less dramatic than it sounds. Company name change sets out why the entity, its contracts and its age all continue untouched — and where the real weeks actually go.
There is one annual obligation that arrives with the directorship rather than with the company, and it is missed by founders whose compliance is otherwise spotless. DIR-3 KYC filing explains why nobody will remind you about it and how far a lapse reaches.
A private limited company is a vehicle its shareholders own and may one day divide. The charitable form is not: our section 8 company guide sets out the five capabilities you give up, and why each one is the price of the licence.
Before choosing between structures, one annual cost is worth comparing. An LLP owes two filings every year whether or not it trades, with the penalty falling on its designated partners personally — our LLP annual return guide sets out sections 34 and 35 and what a dormant LLP actually ends up owing.
The LLP route works on a different principle: its governing document is filed with the Registrar, and wherever it is silent the First Schedule to the LLP Act decides the point instead. Our LLP registration guide sets out those defaults, which are harder on unequal founders than most people expect.
Staying with a firm for now is a reasonable decision, as long as the firm goes on the register. Until it does, every rupee the business sells on credit is unenforceable by suit, and the disability is measured on the day the plaint is presented. See partnership firm registration.
Each paper gets compared against the others while a difference can still be corrected, the premises permission is collected rather than taken on trust, the proposed names are tested for obvious conflicts, signing is arranged in advance for everybody involved, you receive a dated calendar of the weeks after incorporation, and your guarantee register is ruled up and waiting on day one so entry number one actually gets recorded. We do not advise on, negotiate, arrange, witness or interpret any personal guarantee, and we do not choose your structure — all of that belongs with an advocate and a chartered accountant whom you engage and pay yourself.
What this page leaves out, and why each absence is deliberate
Absent here: any section, rule or decided case; any government fee, stamp duty or professional charge other than ours; any threshold or capital figure; any explanation of what a guarantee clause does, how far it reaches or when it is enforced; any comparison between a company and the other forms of business; and any statement about where the separation between a company and its owners does or does not hold in law. On a page about incorporating for limited liability, that withholds nearly everything a reader might have come to look up.
Three reasons, and the middle one is the one that shaped the page. Fees and figures are out because they move and a number here keeps steering decisions long after it has changed. Form comparison is out because choosing a structure is a judgement on your figures and your plans, which belongs with an accountant who can see both — a table on a website answers for an average reader who is nobody. But the decisive one: the subject this page is about is a document creating a personal obligation, and nothing would do more damage than a website setting out what such a document means. Somebody reads a general description, concludes their own is the same, and signs without advice. So this page describes the shape of a guarantee, where it arrives from, what it is called instead, and what it does not end with — and refuses the content entirely. We also refuse to arrange one, for the same reason.
Strip out all of it and what remains is unaffected by any amendment made anywhere. That the separation between a founder and a company is real and is the usual reason to incorporate. That it is given back voluntarily, in writing, by the founder, to the handful of outsiders who actually put money or property at risk — the bank with the first facility, the landlord of the first premises, the supplier on credit terms, the lessor of the first machine. That nobody uses the word while it is happening, because every alternative phrase is true. That it follows the signature rather than the office, so an exit releases nothing without a written release obtained at the time. That a joint signature commonly exposes each signatory to the whole and the holder approaches whoever is easiest to reach. That people with no shares, no role and no information end up inside the obligation. And that the wall holds everywhere no guarantee was given, which is most of a business’s year.
If one thing from this page survived, it would be the empty register. Five columns, started on the day of incorporation, before there is anything to write in it. The founders who keep it can answer the question in ten seconds when a buyer, a lender or an investor asks it, and the ones who meant to start one answer it four years later from memory, badly. It costs ten minutes once and nothing afterwards, and of everything in this guide it is the only item that is purely administrative and still decides outcomes.
Where to go rather than here. To an advocate, before signing anything in your own name, and separately for whatever the founders should agree between themselves about shared exposure — in year one, while that conversation is easy. To an independent adviser for any family member being asked to sign or to offer property, chosen by them rather than by you. To a chartered accountant or company secretary for whether a company is the right form and what the first full year actually costs, in writing, before you register. And to the person holding the pen at the counter, for one question: what is this document called?
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