Starting a Limited Company as a Contractor

With the New Year come new decisions, new beginnings and most importantly, action. For many this is the time of year in which to set goals and take leaps they have been hesitating over for a long time. For many, this is the time to start a company of their own.

Starting a limited company can be daunting. There are many more things to consider than is often realised. You will become a director, you are responsible not just for yourself but your company as a separate entity, and you have a variety of taxes to keep on top of as well as endless administration. But with all of this comes multiple benefits such as being your own boss, being able to take as much time off as you like (contract permitting), being able to take advantage of tax efficiencies and being in control of a business of your own.

To start a limited company, you must incorporate one by registering with Companies House. To do this you will need a suitable name for your company, a legal address for the company, information about the director and information about any shareholders. You will also need to arrange the incorporation fee which varies depending on your method of incorporation; online will charge £15, by post will charge £40 or £100 for an express service and formation agent fees will vary if you choose to use one. Applying online at Companies House website is the simplest and cheapest method of incorporating your company, but using a formation agent can provide you with valuable insight and advice for starting your business.
Alternatively, get an accountant at the same time with Qdos Accounting and receive free incorporation with your accountancy package.

Once incorporated you will be obliged to send your full annual accounts to Companies House at the end of each financial year, but you will also need to send your accounts to HMRC, along with your company tax return and any corporation tax due. Before you can do all of this though, you will need to let HMRC that your new business exists by registering online, which you must do within three months of commencing any business activity such as marketing. HMRC will then send you your Unique Taxpayer Reference along with information on how to pay your corporation tax and so on.

You will also need to set up a business bank account as your business finances are considered a separate entity to your personal ones.

Now you are set up to start trading but that’s not the end of your tasks to get started. You will need to develop your business profile (a contractor’s version of a CV), develop a marketing plan and start searching for contracts so you can make the transition to contractor.

By:Jane Hailstone

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