Setting up a limited company could be a smart move for your business. Limited companies enable you to maintain control of your operations and define everything you do, but often in a more tax-efficient way.
Some potential clients may restrict who can pitch for their contracts to only limited companies – meaning that setting your company up as a limited company can widen the scope of work you can pitch for.
Who should set up a limited company?
Getting set up as a limited company can be a great option for freelancers, contractors or small business owners – but whether or not the choice is right for you can vary from business to business.
Its important to note that a limited company should never be set up for tax benefits. Investing in limited company status should be considered for long term benefits, not for short term gain.
While there are many potential benefits to limited company ownership, there can also be risks involved such as changes to how much tax you pay and what administrative work you need to do. If you’re confused about the potential benefits, it’s always best to discuss your options for both new and existing businesses with a professional like TBL. We can evaluate your individual situation and offer guidance on what your best options are – and how to make them a reality.
How do you set up a limited company?
There are several steps involved in setting up a limited company. First of all, you’ll need to decide whether to set up a private Ltd company, or a public Plc. The majority of small business owners choose Ltd, as they have no minimum share capital – whereas Plcs require a minimum of £50,000. Get in touch for help identifying which option is best for you.
Once you have decided on the type of limited company to set up, you’ll also need to decide on a name for your company in order to register it.
Then comes the trickier step. You’ll need to identify what your business does using a Standard Industrial Classification (SIC) code. Companies House maintains a list of SIC codes on the gov.uk website which can help you identify what your business is classed as.
You’ll need a business address to register, as well as deciding on the ownership of your company. Consider who will have director roles, will you have shareholders, and what their responsibilities and ownership will look like.
When you have made these decisions, you’ll then need to register your business with Companies House and complete a number of forms:
- Memorandum of Association – this requires your company name, location and business type.
- Form 10 – for this you’ll need the names and addresses of any directors, as well as your limited company address. This doesn’t need to be where you work from, but it will be where any HMRC and Companies House correspondence is sent.
- Form 12 – this form states that your company complies with the terms and conditions of the Companies Act.
- Article of Association – this outlines the powers your directors have, what rights your shareholders have, etc.
Once set up, you will then have specific responsibilities relating to your limited company such as how and when you file your taxes, and how you keep company records.
What should I do first?
If you’re a small business or a first time business owner, the ins and outs of how to set up your business can be overwhelming. When your profession doesn’t focus on tax and business operations it can feel like a huge hurdle to overcome before you can spend your time doing your actual work! This is where the right accountant can be a huge asset.
TBL are experienced accountants with a wealth of knowledge around small businesses and tax laws. We can help you identify what the best set up is for your business – and then help you with the practical side of setting up, so that you can get back to doing what you do best.
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TBL Accountants are your local accountancy firm operating in Southend and across Essex. We specialise in a variety of services as personal, business, and charity accountants. Want to find out more? Get in touch with our team today.
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