How to set up a Limited Company – 8 things you should consider
Thinking about setting up a limited company?
Let me tell you, setting up as a limited company is one of the most tax-efficient ways to get paid for your hard work!
With a limited company set up, 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.
Here are 4 easy steps you need to take to set up your limited company today:
Step 1 – Choosing the type of company
When you are searching for limited companies, you may also come across public limited companies…
Most freelancers, contractors, start-ups and small businesses will opt for a private limited company, as PLCs must have a minimum share capital of £50,000, at least two shareholders, two directors and a qualified company secretary.
There’s no minimum share capital requirement for LTDs. You can set up a LTD with a single share worth £1 if you wish.
Step 2 – Choose your director (s)
You must appoint at least one person as director of the company. Most people are eligible to become a director. All you need to be is older than 16 and not previously disqualified from being a director.
Directors do not have to live in the UK but must have a UK registered office address. If you are becoming a director your name and service address will appear on the Companies House public register so bear that in mind. If you object to having your home address on a public register you can apply to Companies House to have it removed.
Step 3 – Picking your company name
This can be a fun and exciting part if you have not picked your name yet, but if you have, you need to register it. Much like a web address, your company name has to be completely unique.
You can differentiate in a few ways to guarantee a unique name – for example, a limited company name can use either “Limited” or “Ltd.”
Step 4 – Identify your persons of significant control
You are required by law to keep a register of anyone who is considered to be a ‘person of significant control’ at your registered office, and file that PSC information at Companies House. This register must be available for inspection, failure to provide it results in a criminal offence.
For the purposes of incorporation, a person of significant control is some who holds more than 25% of the shares in the company.
You also need to register anyone who holds more than 25% of the voting rights in the company, but given you will be incorporating with ordinary shares the voting and ownership percentage will remain equal as and until you decide to issue ‘non-voting’ shares, but you will not have a need to do this until later.
Step 5 – Forming your limited company
If you are the company director, you will need to provide some details to help Companies House identify you as a company director. These include:
- Letting them know what type of business your limited company will carry out by submitting a SIC code (Standard Industrial Classification code) This code is all about what you do.
- Decide what addresses you want to register for your business. You’ll need to choose your Registered Office Address, and provide a service address, but these can be the same.
- Decide on the ownership of your company – how many shareholders do you want and how many shares will they have each.
Once you’ve done this, you’re good to go.
Step 6 – Complete forms
After you have registered your name, you will have some forms to fill out including:
- Memorandum of Association – limited company name, location, business type
- Form 10 – director’s names, addresses and registered limited company address
- Form 12 – states the limited company complies with the terms and conditions of the Companies Act
- Articles of Association – outlines director’s powers, shareholder rights
Really, that’s how you become a limited company. There are some additional factors you will need to do, including looking at a business bank account and small business insurance.
Step 7 – Set up Payroll
PAYE is probably the easiest way to administer paying your staff and making sure the right tax is being taken from their salary and the right tax is being paid by your company.
Step 8 – Accounting
You are also required to keep a record of all of your company expenditure and earnings. You should think about hiring a company accountant or using personal accounting software.
If you need help with your limited company, book in a call with us today!