How to Set Up a Limited Company

Starting a business is exciting, it is new and fresh and completely yours. But how to go about it? You have investigated the different trading styles and you know that the limited company route is the right one for you, but in your research you also know that it is the most complicated to set up.

You’re going to need a name for your company before you can do anything else. Your company name can be just about anything but remember that it is your first piece of marketing so spend a little time deliberating on your choices, making sure it is easy to remember and understand particularly over the phone. Companies House has a WebCheck service so you can see if the name you want is available before trying to register it.

Once you have your name sorted, you can breathe life into it by registering it with Companies House, also known as incorporating your company. You can register in one of three ways. You can use the Web Incorporation Service on Companies House website which is the easiest, fastest and cheapest option, you can complete the IN01 Application form and send this by post to Companies House along with the Memorandum of Association and an Articles of Association (more information on these is available on their website) or you can use a formation agent to incorporate your company for you, which varies in service and pricing (there is an extensive list of agents on Companies House website). Once you have registered, Companies House will send you a certificate of incorporation which is the legal proof of your company’s existence.

Now that your company is a real entity and no longer a figment of your imagination, you will need to let HMRC know that you are going to owe them some tax. You must inform HMRC about your business within three months of starting any business activity such as marketing or contract hunting. HMRC will then send you your Unique Taxpayer Reference along with information on how to complete your company tax returns and pay your corporation tax.

Other things you will need to consider when setting up your limited company are:

• Setting up a business bank account – you are legally obliged to have a separate account for your company finances when you open a limited company.

 

• Finding a suitable accountant – you are not obliged to appoint an accountant but most will do to take on at least some of their accounts, as this lightens the administrative burden of running a company and provides some expertise on financial matters.

 

• Developing a marketing plan – this may be setting up social media accounts, time scaling your efforts, getting business cards printed, planning your contract search for optimum performance, developing your business profile and so on.

 

• Deciding how you will transfer from permanent employment to contracting with minimal gaps in your income – this may not apply to everyone but bridging that gap can be one of the hardest parts of going contracting. If you can maintain some permanent work while you get to grips with contracting, it is advisable to do so, otherwise a useful pointer would be that contract jobs will generally want you to start within two weeks.

 

• Purchasing insurance – most contractors will purchase some sort of insurance for their business, whether it is a basic business insurance such as professional indemnity insurance or an income protection insurance in case of unexpected illness, you should look carefully and decide which are right for you.

 

Don’t forget about the IR35 legislation which will now affect you as a limited company contractor, but otherwise you are ready to take on the exciting new world of contracting.