How to set up your limited company
You’ve made the decision to boldly go where very few people in your circle have gone before. No more micromanaging from a manager whose every move grates on you: from the way they slurp their tea to a po-faced and barely recognisable grunt of “morning” when the reality of a Monday hits you.
You’re now your own boss and ready to freelance. A brave move? You bet. Chances are that you’re feeling overwhelmed and a little anxious by the thought of becoming self-employed, with important decisions to be made on how to shape the future of your business. One of those decisions will be whether to set up as a sole trader, partnership or limited company.
If you’ve chosen the most tax-efficient format of a limited company then read on. Here is our non-jargon guide on how to get started, cut out painful admin, start billing clients and hopefully watch the money roll in.
Choosing a name for your limited company – and this time it’s personal
Now for the fun part. It’s time to get creative and pick a name for your business that will define your brand. Limited companies can be called almost anything but must end with ‘Limited’ or ‘Ltd’. We say almost anything – it has to be unique, there are some sensitive terms that are forbidden (e.g. you can’t choose Prince Philip, Duke of Edinburgh Limited), and it can’t be offensive (we’ll leave that for Prince Philip himself).
If you’re umming and ahhing over your company name and remain unconvinced then don’t panic – you can change its name at any point. The only thing you can’t change is the company number issued by Companies House.
You can find out more about naming your company on the government website.
Opening a business bank account
Your limited company will need to have its own business bank account, separate from your personal bank account, to receive money and pay tax. Most high street banks now offer business bank accounts. You will be asked to provide detailed business and personal information for the bank to assess before accepting the application.
Registering your limited company with Companies House
Once you’ve decided on a company name and business bank account provider, it’s time to go online at Companies House and register your company for only the price of a few of drinks at your local. You will be given a unique company number and required to register for VAT and corporation tax.
All limited companies must have at least one director (you), and should your business grow, you can employ staff. You will need to decide whether you are the only shareholder, or if another person, such as a spouse or business partner, is to hold some shares.
Get in there quick! More than 1,500 people go online every day to register a limited company so your preferred choice of company name could already be taken.
Becoming the director of a limited company has certain legal responsibilities, and these are outlined by the government here.
Selecting an accountant to do the legwork for you
Setting up a limited company may seem like a daunting task but it’s all fairly simple, and most of it can be handled by an accountant, if you choose to enlist one to manage your company’s finances. There are plenty on the market right now all vying to represent you on your new adventure as a contractor, and the good news is that they are there to guide you all the way. You will be spoilt for choice, but ask around for limited company business owners’ recommendations on which accountants or accounting firms are the best.
Through your accountant you will able to:
- Invoice clients
- Submit expenses (you can find out more on claiming expenses here)
- Be informed of how much to transfer from your business bank account to your personal bank account each week, and how much to leave behind for tax payments
- Be notified of any self-employment tax payments due (those HMRC late payment fines can be costly)
Taking on an accountant will spare you tedious admin and paperwork, so that you can focus on winning contract jobs, building a client base and enjoying your free time. As long as you invoice clients and submit expenses; they will take care of the rest, including looking after the dreaded and mind boggling tax return.
A good accountant will be there to make your transition from employee to employer as hassle free as possible.