Setting up a Limited Company is one of the smartest way to get paid for your work. With a Ltd you get to define your brand, own everything you do, run your business in the most tax-efficient way and pitch for work you wouldn’t be able to get as a sole trader.
Some people, usually the folks at Umbrella companies, will tell you that setting up a company is costly and complicated but with low-cost solutions out there it’s a no-brainer.
Four simple steps to setting up a Limited Company
1. Choose type of Limited Company (Ltd)
There are two types:
- Private Limited Companies (LTDs)
- Public Limited Companies (PLCs)
Most freelancers, contractors and small or start up businesses will opt for an LTD, as PLCs must have a share capital of minimum £50,000, at least two shareholders, two directors and a qualified company secretary.
2. Set up limited company
- Go online and set up your limited company yourself.
- Sign up to an accountancy service who will set it up for you, take care of your online accounts and help you complete the incorporation process.
3. Complete the Incorporation Process
Companies House is responsible for all limited company registration in Britain. Their website provides detailed information: www.companieshouse.gov.uk
The following documents must be completed and returned to Companies House in order to complete the incorporation process. Your contractor accountancy service should prepare these for you:
- Memorandum of Association – limited company name, location, business type.
- Form 10 – director’s names, addresses and registered limited company address.
- Form 12 – states that the limited company complies with terms and conditions of Companies Act.
- Articles of Association – outlines director’s powers, shareholder rights etc. (This is normally provided by the Company Act that sets up the Limited Company).
4. Take care of the Legal Requirements
- Limited Company must be registered at Companies House.
- Annual accounts AND Annual Return (Form 363) must be completed and filed with Companies House. This must be done within 28 days of your limited company’s year-end date in order to avoid a penalty charge. This can be done online.
- HMRC must be informed of Abbreviated Accounts CT600 and whether the limited company has any profits or taxable income per company year.
- An annual HMRC corporation tax return must be completed and paid within nine months and one day of the limited company year end, every year.
Image by Joi Ito