If you decide to form a Limited Company, your next question will probably be “How do I do that?” Many people imagine that forming a Limited Company is an exercise in endless bureaucracy, involving mountains of paperwork and astronomical costs. This couldn’t be further from the truth. According to Companies House 362,000 companies were incorporated in the financial year 2009/10 – over 1,000 every day day!
The process can in fact be completed in a matter of hours, and although it can be incredibly simple it’s important to bear in mind that a Limited Company is for life, not just for Christmas.
The most common stumbling block is choosing a name for your new company. Much like a web address, your company name has to be completely unique. You can differentiate in a few ways, for example a Limited Company name can use either “Limited”, or the abbreviated “Ltd.” (e.g. “Freelance Advisor Limited” or “Freelance Advisor Ltd.”). You can find available company names using the Companies House WebCHeck service, but, with over 1,000 being formed every day, the availability of company names is slightly limited.
Once you have settled on a name, you can begin the formation process. This can be done either through a third party (a “formation agent”) – a smorgasbord of which can be found online – or you can use the Companies House Web Incorporation Service. You will be required to provide details about the company to be formed. These include operating address, details of any shareholders and share capital, and details of company officers (Director(s) and, optionally, a Secretary). Companies House will also need three pieces of identifying information to prevent your company being “hijacked”, these will usually be National Insurance number, date of birth, mother’s maiden name, eye colour or telephone number.
Once you have paid the necessary incorporation fees (Currently £15 if you go directly through Companies House, or around £25 through a third party) your formation will be complete. Congratulations! As soon as your company is formed you can start trading – however you’re now obligated to complete and submit several piece of paperwork as the owner of your shiny new Limited Company.
As a director you must personally submit an annual self-assessment tax return, and your company must submit annual accounts, annual return and a corporation tax return. You can find out when to submit these on the Companies House website. Generally your company accounts will be due 21 months after you form your company (the first year being your first trading period, after which you have 9 months to submit your accounts).
You must also notify Companies House of any changes in your operating address, and any changes to your key personnel or shareholders.
Photo by Till Krech