A guide as to how you can set up a limited company
Setting up a Limited Company is one of the most tax efficient ways to be rewarded for all the efforts of running your own business.
Operating as a limited company provides much freedom and flexibility versus being a sole trader. Not just in terms of the obvious limitation on liabilities, but also the way in which profits can be distributed and taxed. If you think you’re ready to set up your limited company, here’s what you need to know!
3 steps for setting up a limited company
1. Choose your company name
This is the fun part of setting up your limited company. You’ll need to an entirely unique name and with 100’s of companies being incorporated every single day; new names can be tricky!
Top tip! Before you get stuck on one name, draw up a list of 2-3 and see which ones also have the best options for web addresses and social media pages. There is no point in incorporating to find your ideal web address or Facebook/Instagram/Twitter pages aren’t available.
2. Setting up your company
As a limited company director, you’ll need to register with both HMRC and Companies House. First point is to provide Companies House with a handful of key details from you in order to be able to identify you as company director and agree the start position for the company in terms of directors, shareholders and capital. Otherwise, your limited company can be up and running within a matter of hours. Companies House will automatically notify HMRC that the company has been born, and they will write to the company’s registered office address within few weeks requesting further information. This process can be a little more involved, but nothing to worry about if you are organised.
3. Completing the incorporation process
The Companies House website contains plenty of information on what is required. The following documents must be completed and returned to Companies House in order to have your limited company finally incorporated (these are often completed by an accountant or formation agent on your behalf):
Declaring your limited company’s director’s names, addresses and the limited companies registered address
This states that your limited company complies with the terms and conditions of the Companies Act
Memorandum of Association
Confirms your limited company name, location and business type
Articles of Association
This outlines the powers of the directors, shareholder rights etc.
Once these four forms are completed and sent off to Companies House, your limited company is all set up and ready to go!
What do you need to do next?
There are a couple more bits of admin you should take care of and there are those pesky reporting and filing responsibilities you need to stay on top of (more of that in a separate blog).
We also suggest you get going with setting up your bank account straightaway and arrange small business insurance to cover the company for any work it undertakes, and of course, you’ll need to get organised and be ready for the company’s reporting and filing responsibilities. Top tip! Look at the Information Commissioners Office website also to ensure you comply with the GDPR too.
Need a hand?
You can team-up with an accountant who can manage this process for you. If you think you are ready, get in touch. Just be minded to know that as a director it is you who is legally responsible for your company’s accounts, business records and performance. If not done properly, there are penalties and fines that can be levied.