If you are thinking about setting up a limited company then it’s important you understand exactly what responsibilities that brings. There are tax advantages associated with running your business through a limited company as well as additional financial and administrative responsibilities. But deciding whether incorporation is right for your business is a separate conversation and one we’ll happily have with you.
Once you’ve decided to set up a limited company, the good news is that the whole process is actually a lot easier than you might think. Here’s what you need to do;
Registering with Companies House
The first step in setting up a limited company is to register the details of the company with Companies House. This will cost you just £12 and can be done here. To register your company you will need the following:
- A company name
- A company address
- At least one director
- Details of the company’s shares
- The principal activity of the company in the form of a SIC code
Once you have these details the company can be incorporated in as little as 24 hours of submitting your application. The company will be given a year-end accounting date based on the month it was incorporated, although this can be changed to a more convenient date. Companies House will inform HMRC of the registration and the company will be issued with a 10-digit Unique Taxpayer Reference. This will be posted to your company’s address usually a few days after registration.
Business bank account
The registration is now complete but there are a few other things you need to put in place before you start trading. As the company’s finances are now legally separate from your own, you will need a dedicated business bank account to make and accept payments. This can take a few weeks to set up as the bank will need to see certain identification documents from shareholders and directors. The process will usually be simplified and sped up by working with the same bank you already hold a personal account with. You should also check the charges and free banking periods that apply.
Another essential consideration when setting up a limited company is VAT registration. HMRC will not tell you when you need to register for VAT, it is your responsibility, as the company owner, to know what thresholds apply. If your company’s taxable supplies (i.e. turnover):
- Exceed £85,000 for any 12-month period;
- Or are expected to exceed £85,000 in a single 30-day period
… then you must register for VAT. If your turnover does not meet this threshold, you can choose to register for VAT voluntarily and in some cases, this may benefit your business.
Once you have completed the VAT registration process, you will receive a VAT number (which must be listed on all invoices from that point on) and a VAT registration certificate. This will include your date of registration and will tell you when your first VAT return needs to be submitted. Registering for VAT will usually take around a week.
There is no legal requirement to take out any kind of business insurance when you set up a limited company. However, if you employ anyone other than yourself or a family member then you must have employers’ liability insurance in place. Certain professions also require their members to hold professional indemnity insurance to act in their qualified capacity. If members of the public come to your premises then public liability insurance, though not a legal requirement, should be a serious consideration.
Other insurance covers you may wish to consider include:
- Product liability
- Key man cover
- Property and buildings
- Business assets
Another requirement for all businesses with one or more employee is to register as an employer and set up a PAYE scheme. This applies to all businesses and not just limited companies. You must also register if you’re paying yourself as the director of a limited company. This registration must be completed two weeks before the employee’s first pay date and can take up to two weeks to complete. You should also think carefully about how you intend to pay yourself as a company director. Again, this is something we can help you with.
The final step when setting up a limited company is to make sure any qualifying employees are enrolled on a workplace pension scheme. These rules apply to any business with employees and not just limited companies. To meet the requirements of the law, employees must be enrolled on a workplace pension if they:
- Are not already in a qualifying workplace pension
- Are aged between 22 and state pension age
- Earn more than £10,000 a year
- Work in the UK
Although these are the main factors you need to consider when setting up a limited company, there are other business issues you may need to take into account. To discuss setting up a limited company with our team, please get in touch.
How can we help?
Prosper provides a comprehensive approach to accountancy, tax & business growth services for start-ups across the UK. We are your bookkeeper, accountant and finance director all rolled into one. Check out prosper.accountant to learn more about how we can help your business.