Setting Up Your Company
Follow the simple steps below to search for the name you want and for setting up a limited company
Same Day Company Formation (£119+VAT)
We create a company for you and send the Certificate of Incorporation to you along with forms for appointing Directors. Once completed we will send these to Companies House and complete the remaining documents.
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Fill in your details by clicking the button and ordinarily you will have your company formed by next working day
Who can set up a limited company?
In effect, anyone who is aged 16 or over who has not been disqualified from being a director can set up a limited company.
What are the advantages of setting up a limited company?
When you are asking what is a limited company then you should understand that one of the biggest advantages of setting up a limited company is that it is a legal entity in its own right and the liability for its debts is limited. What this means is that, in the eyes of the law, the company is responsible for its actions. When you set up a limited company you effectively ring-fence the finances of the company and set them apart from your own private finances. The result of choosing this sort of structure is that if you run your company correctly, as a company director your risk of loss is limited to the investment you have made in the company. In the majority of cases there are also tax advantages in setting up a limited company, but these vary for each contracting business, depending on your circumstances.
When is it worth setting up a company?
In the majority of cases when starting a business, it is worth setting up a limited company if there are tax benefits to be had by so doing and if there is a need to minimise personal risk. In order to ascertain whether or not there may be tax advantages for your unique situation, you should arrange a consultation with your accountant, or seek help from one of the team at The Smart Contractor. Irrespective of the tax advantages, if you are concerned about personal financial liability, then a limited company is probably the best way to proceed. As a sole trader, you are personally responsible for any debts that your business faces in the event of business failure. In a worst case scenario, a sole trader could face personal bankruptcy for significant debts that are not repaid. With a limited company, you get protection from this exposure.
What is the difference between a private and a public limited company?
The differences between a private and a public limited company are complex, both in terms of their structure and their management. However, in simple terms, the main differences are that the directors of a private company often own or control all, or at least a majority, of the shares and with a public company, the “public” can own some of the shares. Private limited company shares cannot be sold on the open market, for example on the stock market. So, in effect, a private limited company offers the advantages outlined above, cannot raise public funds through the sale of shares.
This is where a public limited company comes into its own, because it enables you to appeal to the public at large to invest in your company. In addition to these differences a public limited company, as the name suggests, is more visible in terms of results than a private limited company and, not surprisingly, comes with a much more significant regulatory burden.
What are the tax advantages of having a company?
When you are a sole trader, you pay tax at the appropriate personal rate on profits as well as Class 2 and Class 4 National Insurance Contributions (NICs). When you have a limited company, the company pays corporation tax on its taxable profits and the tax rates applied are lower than the higher rates of personal income tax. When it comes to employees of limited companies and IR35 and Managed Service Companies, both are subject to PAYE and NICs. As far as shareholders are concerned, income tax is due on dividends and certain types of distribution; all of which come with an attractive £5,000 tax free allowance. In the majority of cases, these advantages add up to significant tax planning opportunities for contractors. In order to find out the potential savings that setting up a company could bring you, you should contact one of the team at The Smart Contractor.
What is the difference between being a sole trader and having a company?
The main differences between being a sole trader and having a limited company are the tax advantages that the limited company structure brings, as well as the peace of mind of knowing that your personal finances are ring-fenced from your business affairs.
At a deeper level, the treatment of losses, taking profits out of the business, borrowing and pension legislation is different for sole traders and limited companies. When you set up a limited company, you should be aware that the accounting requirements are more structured and in some ways more onerous than the requirements placed on a sole trader. That said, with the right accountant on hand, you should be largely unaware of the increased burden.
How do I set up a limited company for contracting?
Before setting up a limited company for contracting, it is best to consult with one of the team at The Smart Contractor. Once you have ascertained that setting up a limited company is the best route for your unique situation; things couldn’t be easier. At The Smart Contractor we can do everything for you for only £119 + VAT.
If you choose to carry out the formalities yourself, you can set up a limited company from scratch and you will need to register or incorporate that business at Companies House as well as providing a Memorandum of Association and Certificate of Incorporation.
While the process of setting up a limited company on your own is neither overly complicated nor overly onerous, most people prefer to opt for the peace of mind offered by the likes of our team at The Smart Contractor. When you choose us to carry out the process for you, all you need do is tell us the name you’ve chosen for your company and leave us to do the rest.
What information is needed to set up a company?
In order to set up a limited company, you will need to provide a name and a Registered Office address for the company as well as the names of at least one director and one shareholder. You will also need to create a Memorandum of Association which is the document that outlines what the initial shareholders have agreed regarding the creation of that new company. Memorandum of Association documentation can be purchased and created online and once completed and signed by a witness then need to be sent to Companies House. Once again, this procedure isn’t particularly complicated, but for the small cost involved, most people prefer to have an expert like The Smart Contractor look after these formalities for them.
What is involved in setting up a limited company?
In order to set up a limited company, you need to:
- Choose a company name.
- Agree the remit of the company with everyone involved
- Complete a Memorandum of Association (for a newly created company).
- Create a statement of capital that outlines details of the company’s shares and their rights.
- Write rules about how the company will be run – this is known as Articles of Association.
What are the costs of setting up a company?
If you choose to register your limited company with Companies House yourself, you can do so online for £12. If, however, you decide to get The Smart Contractor on side, then the whole process, including creation of your company, arranging a bank account and registering for VAT/PAYE will cost you a just £119 +VAT.
What are shares in a company?
Shares in a limited company are portions of the ownership of the company that are issued (or allotted) to shareholders. The purpose of shares is to determine the limit of the liability of any shareholder should the company fail.
The minimum number of shares required to start a company is just 1, but as time goes on share allocations can be altered according to the evolving needs of your business. Because of this, issuing shares isn’t something you should worry about too much at the outset. The number of shares a shareholder has will define their entitlement to dividends and the number of votes they enjoy in shareholder meetings. There are two main types of shares: ordinary and preference shares. The former are typically issued by small companies and come with full dividend and voting rights as well as entitlement to capital in the event of the company being wound up. The latter provides a fixed right to dividend income and no voting rights.
Can you have a limited company without share capital?
Not for a contractor. Because you are required to issue at least 1 share, it is essential that the company has sufficient authorised share capital to back that share.
There is such a thing as a Company Limited by Guarantee but that is usually used for not-for-profit organisations.
Can you set up a limited company with just one person?
Yes, you can set a limited company alone and take up the joint roles of director and shareholder.
How does setting up a limited company reduce risks?
One of the biggest reasons for setting up a limited company is that the company is the legal entity and has its own ring-fenced financial activities. The advantage of this sort of arrangement is that when you set up your business, you can operate with the peace of mind that the liabilities of the business cannot impact on your personal financial situation, unless you have signed a personal guarantee.
So, in short, if your business runs into financial difficulty, as a sole trader you will be personally responsible. In the event of a similar misfortune for a limited company, the directors and shareholders are protected from the impact of the debt, unless they have provided personal guarantees.
How do I get a bank account for a limited company?
Getting a bank account for a limited company is, not surprisingly, a more complex process than opening a personal bank account. In terms of choosing which bank is right for you, things like flexibility, cost and service are likely to be at the top of your list, but if your own personal bank doesn’t tick all your boxes, then finding a new bank could prove difficult.
This is why many people who set up a limited company for the first time turn to their trusted advisors to provide the introduction and support they need. At The Smart Contractor we have close relationships with several banks and are able to set up your limited company bank account as part of our limited company set up service.
What needs to be registered with HMRC in relation to a company?
When you set up a company, you will need to register with HMRC for Corporation tax as well as VAT and PAYE if you have employees. Once again, this is something that The Smart Contractor will look after for you, so you can get on with doing what you do best – running your contractor business.
What if I end up not needing a company in the future?
If you set up a limited company and then find that you no longer need it, assuming it is still solvent, you can apply to get the company struck off at Companies House or start a member’s voluntary liquidation. In most cases, striking the company off is the most cost effective option. In the event that the company is unable to pay its bills, it will be labelled insolvent and in this instance you will need to go through a liquidation process. If creditors aren’t able to get paid, then the best course of action is either a Company Voluntary Arrangement.
Ultimately, if all else fails, a compulsory liquidation will be enforced if no other solution can be found. In certain circumstances limited companies can be made dormant. This situation might be of interest to you if you think that you may need the company in the future. Winding up or making a limited company dormant is quite complex if it’s not something you do on a regular basis, but needless to say, the team at The Smart Contractor is highly skilled in every aspect of limited company creation, administration and closure. And we are here and ready to help.