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Getting started with your UK limited company

A limited company is one of the most popular formal business structures in the UK. It offers contractors in particular a number of benefits including tax efficiencies, reputational advantages and limited liability protection.

If you’ve weighed up all your options (hopefully with the help of Umbrella Exchange) and made the decision that running your own limited company is the best trading structure for you, do you know exactly how to get started?

Here’s our quick and easy overview to setting up a limited company for contracting.

choose a suitable name

How difficult is it to set up a limited company?

Choose a suitable name

 

The first step in forming a limited company, before the paperwork and registration process begins, is to decide on a suitable name for your business. You cannot have the same name as another registered company or even one that’s too similar to another company. The official name must also end in either Ltd or Limited. You can conduct a simple online search on the Companies House name checker website to see whether the name you would like to use for your new company is available.

Registering your new company

 

Once you have decided on a suitable name you will need to register your limited company with Companies House. To do this you will need to provide them with:

  • Your new company name. Remember this must be different from other registered companies to avoid confusion.
  • The Company’s registered address. If you have an accountant, you can use their office address as a Registered Address.
  • Name and details of at least one director. This will be you!
  • Name and details of at least one shareholder. This can be the same person as the director (which is the case for limited company contractors).
  • Details of your company’s shares (this document is called the ‘Memorandum of Association’).
  • Rules about how the company is run including an outline of the directors’ powers and the rights of any shareholders (this document is called the ‘Articles of Association’).

Finally to formally register (or incorporate) your private limited company you will need to complete form IN01.

Once registered, you will receive a Certificate of Incorporation that shows your company number and the date it was formed. This is proof that your company legally exists.

So far so good. you’ve registered your limited company, but what next?

 

You can start trading through your new company as soon as you receive notification that Companies House has approved your application. However, you must register with HMRC for Corporation Tax within 3 months. To do this you need a 10-digit tax reference number (UTR) which will have been issued to you by HMRC when the company was set up and registered after incorporation.

Additionally you must register your company as an employer and apply for PAYE to pay yourself a salary. Depending on your circumstances it may be beneficial to register for VAT. This is compulsory if your turnover exceeds £85,000 in a 12-month period.

Finally, as your limited company is a separate financial entity to you, you must set up a new bank account in the name of your company.

From here is it also recommended that you organise your business insurance to protect yourself from any claims of negligence, or unintentional legal breaches. Find out more about contractor insurance here.

registered your limited company

How much does it cost to set up a limited company?

It costs £12 to register your company online with Companies House. If you prefer a paper registration, this will cost £40.

Although this isn’t a big expense there are certain procedures that you will have to follow and many busy contractors simply can’t afford the time away from their contract work to check and complete all the paperwork.

The easiest way for time-pressed contractors looking to avoid the nuisance of excess admin can use a company formation agent or an accountant to complete the process on their behalf. They will complete and review all forms and submit them in a timely manner so that you can start contracting and billing as soon as possible.

How much could you earn by having a limited company?

We can show you how your take-home pay compares and help you find an experienced accountant to organise the set up process on your behalf.

Further reading:

Insurance - Umbrella Exchange

Understand the insurance requirements for limited company contractors.

Accountant - Umbrella Exchange

How to benefit from assistance with your company accounts and filing.

Legislation plays an important part in the working lives of contractors.