Setting up a Limited Company
If you want to set up a limited company, you should be aware of the different kinds of company registrations recognised under UK law. The process of company formation is relatively easy these days while much of the work for incorporation is performed online.
Setting up a company is not difficult or expensive, but you should know the options open to you. Then choose the best one for your distinct line of work.
The types of Company
This method is by far the easiest way to start your business and requires very little bureaucracy while the set-up costs are low. All you need to do is register with the HM Revenue & Customs as a self-employed person. You can then start trading as a sole trader in your desired business. You can call HMRC on 0300 200 3300 (+44 135 535 9022 outside of the UK) or visit their self-employment website for more details.
The tax issues of being a sole trader are very straightforward. You simply have to declare your income every year on your tax return. The main drawback is that you will be personally liable for any debts your business incurs. For that reason, you could be in danger of losing your home if your business fails with large amounts of debt.
Limited Liability Partnership (LLP)
An LLP is very similar to being a sole trader but involves more than one person running the business. Be aware that each of the partners is liable for the debts of the company should it fail. Therefore, you should only consider setting up a partnership with people you can trust, and you know well.
Private Limited Company
This representation is the kind of company most of us think of when considering setting up a company in the UK. While more difficult to start than a Sole Trader, it's not difficult to register as a limited company. You have to follow the following steps:
Register your company name with Registrar of Companies at Companies House. This process costs from £29.99 + VAT when using online services.
The Benefits of Being a Limited Company
The key benefit of being a limited company is that the directors are not personally responsible for company debts. Due to this law, it's more commonly known as Limited Liability. Your business and personal income are entirely separate matters when debts get resolved.
You are probably going to pay less tax as you can take most of your income as dividends, rather than as taxable salary.
A Limited Company gives your customers a much more professional impression than being a sole trader. Some businesses may only be willing to deal worth limited companies.
UK law protects your business name when you register it with Companies House. You should, therefore, choose a unique name while remembering to check if a suitable domain name exists. As a limited company, you'll also carry more influence with your bank and other financial lenders. These lenders will be more likely to provide finance.
Other Legal Requirements of a Limited Company
As well as registering your company with HMRC, there are other rules you must comply with when setting up a limited company.
- You must clearly show your company's name on all your stationery and paperwork. Don't forget to put it on your website and to display it in your office building. You should also include your registered number and registered office address.
- If you want to list the directors of the company, then you must include them all.
- Your company does not become a legal entity until the Registrar of Companies receives all the necessary documents. All forms need completing and signed correctly. You'll receive a confirmation once accepted.
- Since 2010, it is no longer a legal requirement to have a company secretary.
- You must have at least one Director who must be over 16 years of age and not a un-discharged bankrupt.
- You must file your annual company accounts with Companies House. It is also not a legal requirement to have an accountant.
- You must have a registered office in the UK, although your physical office can be in your own home.
If you're not sure which option of company structure is the best for you, then please seek professional advice. You can discuss your needs with a solicitor, accountant or even your bank.
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