If you have recently decided to work in the capacity of a contractor, your research must have told you that the most tax-efficient manner of doing that is to set up a limited company. If you have been wondering how to get started, we share with you 9 easy steps to begin contracting and billing your clients without any delay!
Understand How a Limited Company Works
The very first step to setting up your limited company is understanding how it works in the first place. In law, a limited company is often known as a ‘moral person,’ which means that it has a unique identity, and it carries out business activities under its own name. It also has its own business bank account and can pay taxes as well as acquire debts like a physical flesh and blood person. Hence, understand the legalities of a limited company before beginning with the set up in earnest. How much does it cost to setup Limited Company?
Decide on the Essentials
It is also crucial to consider some essentials such as coming up with a company name, deciding on where it will be based as well as the individuals who will be a part of the company. In case you plan on expanding your company or changing it in the future, you might want to go with some generic name of the company.
Issue Shares
It is also possible for you to include some other shareholders in your company according to your wish. That said, you must ensure that the total shares are proportionately divided into the capital. You might also find it beneficial to sell a share to someone else to ensure there is a tie-breaker in case of disagreements.
Set up Your Company at Companies House
The next important thing to do is to set up your company at Companies House. Once the above decisions have been made after careful consideration, you must visit Companies House online to set up your company at a low fee. The setup process is fairly straightforward, and you can simply use the online forms for guidance. You must also choose a unique name for your company as Companies House will verify it. It will also instruct you to appoint a company secretary and company director. You can carry out this process by yourself without worry, or you can also seek the help of a professional accountant.
File a Memorandum of Association
Another important thing you will have to take care of is to file a Memorandum of Association. This needs to be done with Companies House. A Memorandum of Association is essentially a document that conveys your reasons behind setting up a limited company as well your plan to run it. If you get into any legal quagmire or tax disputes in the future, this document can prove to be very beneficial. For instance, if you ever find yourself stuck in an IR35 case, courts will generally look into this document.
Consult an Expert
This is one of the most important steps to consider when setting up a limited company. Although getting started online is quite easy, availing the help of specialists is always a good idea. For your own protection as well as for tax purposes, an expert accountant can suggest a number of structures and ways to make your new company more tax-efficient. Moreover, these professionals know all about the industry, so they can use their experience to the best of your advantage. An accountant will not only take care of all the documentation and paperwork for you but will also handle your taxes and payroll for a small fee. It is a small price to pay to get such a huge workload off your hands and into the hands of an expert.
Get a Business Bank Account
It can be a challenge to get a business bank account. You must consider using the High Street banks. Again, an expert can help you in this regard. Alternatively, you can also avail of a bank account service to set up your business bank account within a matter of hours.
Register for VAT
Another crucial step to setting up your limited company is registering for VAT. You can visit the official HMRC website to register for it. You will realize that doing it online is much better and quicker than doing it through the paper route. If you experience a delay in getting the VAT registration, you can simply back bill your clients.
Claim the Start-up Expenses
Finally, you can claim all start-up expenses you have incurred while setting up the company against future revenues that are generated by your limited company.
And voila! Your limited company has been set up. Yes! It really is as simple as that! Set up your limited company with the help of Target Accounting today and also get specialist limited company accounting services.
Frequently Asked Questions:
What is a limited company?
A limited company is a type of business structure in the UK where the company’s finances are separate from the personal finances of its owners.
What are the advantages of setting up a limited company?
Setting up a limited company can provide limited liability protection, tax benefits, and a professional image for your business.
What are the steps to set up a limited company in the UK?
The steps include choosing a company name, appointing directors and shareholders, registering the company with Companies House, and setting up a business bank account.
How do I choose a company name?
Your company name must be unique and not already in use by another business. It must also comply with certain naming regulations.
Who can be a director of a limited company?
Any person over the age of 16 can be a director of a limited company, as long as they are not disqualified from acting as a company director.
What are the requirements for shareholders in a limited company?
A limited company must have at least one shareholder, who can also be a director. There are no restrictions on the nationality or residency of shareholders.
What documents are required to register a limited company with Companies House?
You will need to provide a memorandum and articles of association, a completed IN01 form, details of the company’s registered office address, and information about the company’s directors and shareholders.
How long does it take to register a limited company?
Once all the necessary documents are submitted, it usually takes around 24 hours for Companies House to register a limited company.
What are the ongoing responsibilities of a limited company?
Ongoing responsibilities include filing annual accounts and confirmation statements with Companies House, maintaining statutory registers, and complying with tax and reporting requirements.
Do I need a business bank account for my limited company?
Yes, it is a legal requirement to have a separate business bank account for your limited company to keep your personal and business finances separate.
What are the tax implications of running a limited company?
Limited companies are subject to corporation tax on their profits, and directors and shareholders may also be liable for income tax and national insurance contributions.
Can I change the details of my limited company after it is set up?
Yes, you can make changes to your company details, such as appointing new directors, changing the registered office address, or altering the company’s articles of association, by filing the relevant forms with Companies House.
