If you’re asking what is a limited company then the chances are that you’re in the process of setting up a new business and are wondering what would be the best structure for you. Or, you may be a sole trader right now and are considering the prospect of setting up a limited company. Either way, you’re in the right place. We can help.
What is a limited company?
Setting up a limited company is a way of organising your business so that it becomes a legal entity in its own right. This way of setting up a business ring-fences the liability of the business to the business itself, thus removing your personal finances from the equation. Responsible in its own right for its actions, many people choose the limited company way of working to protect themselves against losing personal assets in the event of business failure.
Limited companies are made up of the people or the other businesses who are shareholders of that business. In a limited company set up, it’s the directors who have responsibility for running the company. Those directors may or may not own shares; it’s up to them. They do however have legal responsibilities that are concerned with the correct running of the company. Unlike individuals, limited companies don’t pay personal tax, they pay corporation tax.
What are the advantages of a limited company?
There are many advantages of setting up a limited company over being a sole trader, but the two most significant in our view are that your liability is limited and there are often significant tax benefits to be had by going this route. What’s more, limited companies are quicker and easier to set up than most people think. Beyond those advantages, some people also think that limited companies give more credibility to their business. These, together with attractive pension possibilities and ease of transfer or sale of the business in the future are arguably some of the most significant reasons for going the limited company route.
What steps do I need to take to set up a limited company?
Setting up a limited company isn’t complicated. However, many people are fearful of doing it themselves in case they make a mistake. That’s why more and more people are choosing to set up their limited companies online or with the help of their accountant. If you’re thinking of setting up a limited company yourself or are just intrigued to know the main steps, here’s what you’ll need:
- A company name.
- An address for the company.
- One or more directors.
- One or more shareholders.
- A memorandum of association – which is an agreement made by the initial shareholders to create the company.
- A statement of capital which details the company shares.
- Articles of association – which are the written rules about how the company will be run.
- Details of anyone who has more than 25% share in the business.
- A SIC code – this is the number that identifies what your company does.
Once you have all this and register, you’ll get a Certificate of Incorporation, which is official confirmation that your company exists.
Is setting up a limited company complicated?
Setting up a limited company isn’t particularly complicated, but understandably, some people are wary of doing it themselves. If it’s something you’ve never done before, the process can seem intimidating. Like most things in life, if you feel apprehensive about doing it yourself, it’s probably best to call in the experts.
Is setting up a limited company time consuming?
Setting up a limited company isn’t necessarily time consuming either. However, if you’re someone who is always in a rush, moving from one urgent task to the next, again you may be better off passing on the duty to someone else. There are companies online who can turn around the setting up of a limited company in what seems like record time, but at the end of the day, you want the peace of mind of knowing that everything has been done correctly and compliantly. This is why it’s best to choose a partner you have checked out and trust.
If you’re considering setting up a limited company but aren’t sure whether or not it’s the right thing to do, we can help. We can set up the company for you and provide as much or as little subsequent support as you need. With The Smart Contractor we’re with you all the way to success.