Setting up a Limited Company is one of the smartest way to get paid for your work.
With your own limited company 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. Check out Crunch’s beginners guide to Limited Companies to see what it all entails.
Most business owners will choose to work either as a sole trader, through an umbrella company, or start up their own Limited Company. If you decide to go the company formation route, here’s what you need to know.
Four simple steps to setting up a Limited Company
1. Choose which type of Limited Company to set up
There are two types:
- Private Limited Companies (LTDs)
- Public Limited Companies (PLCs)
Most freelancers, contractors, startups and small 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 your limited company
This is the part of the process which many people consider to be tricky or bureaucratic – but it’s actually really simple. You can go online and set up your limited company yourself in about ten minutes for the cost of a takeaway pizza. You just have to supply certain personal details to help Companies House identify you as a company director, and you’re good to go. Companies House will often have your limited company formed in a few hours.
3. Complete the incorporation process
Companies House is responsible for all limited company registration in Britain. Their website provides detailed information.
The following documents must be completed and returned to Companies House in order to complete the incorporation process. Often your company formation agent or accountant will complete these on your behalf.
- 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
As a limited company director you have certain legal responsibilities. These include:
- Your newly set up Limited Company must be registered at Companies House.
- Annual accounts and Annual Returns must be completed and filed with Companies House every year. Learn more about what you need to file here.
- HMRC must receive abbreviated accounts every 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.