If you’re starting your own business, there’s a good chance you’re thinking about setting up a limited company. However, not everyone chooses this option.
If you’re a contractor, for example, you might be torn between launching a limited company and a becoming a sole trader, and there are benefits to each.
Here’s a guide to why setting up a limited company might be the right choice for you, and how to get started.
Why set up a limited company?
Setting up a limited company has a number of potential benefits, including:
- You’re not liable for your business’ debts in the same way you are as a sole trader, because it’s a separate legal entity.
- You can have shareholders (although shares cannot be sold publicly).
- It can increase your credibility. Depending on what you do, you might be seen as more professional by clients and customers if you operate as a limited company.
- You might be able to pay less personal tax. UK Corporation Tax on profits is 19% for the 2017/18 tax year, so you could pay yourself a small salary and take the rest of your income in dividends.
- It can also be affordable to set up.
How to set up your limited company
First, you’ll need to incorporate at Companies House. You can do this online, or your accountant can do it for you. You need to choose a name and then send a memorandum of association (which includes your name, address and type of business). The director must sign this, and it must be witnessed.
You’re also required to submit your articles of association, which set out the rules for running the company. In addition, you must fill out the IN01 form and send it to Companies House. This is all easy enough to do online, where the forms guide you through the process.
You’ll need to appoint a company director and a company secretary. Company directors have certain responsibilities, so check with your accountant if you’re unsure of what these are.
Setting up a limited company: get professional help
It’s always a good idea to get help from a professional accountant when setting up a limited company. While the process is reasonably straightforward, problems can and do arise, so it makes sense to avoid these if possible.
Your accountant can help to prevent problems right from the start, so you can launch your business without having to worry about all the details. They can make the whole process much easier, and it’s often very affordable to get started.
If you think setting up a limited company is the best option in your circumstances, we’d be happy to help you set it up. And if you have any questions about the process, or you don’t know whether it’s the right option for you, get in touch with our team and we can talk you through it.