Want to set up a Limited Company but not sure where to start? Watch our video for some guidance.
You’ve finally made the decision to set up your own company and you want to know the best way to get started. Everything needs to be done quickly as there seems to be a lot of admin to get through, but you want to make sure that you do it efficiently and do it correctly.
These are our 6 easy steps to set up your new company:
- Registering the company
- Registering for PAYE
- Registering for VAT
- Opening a business bank account
- Business insurances
- Finding an accountant
Registering the company
This is something you can simply do online through several websites but the easiest is to use Companies House as they’re the government body that monitors all Limited Companies.
To set your company up, you’ll need to think of a few details first:
- A company name – Something simple, could be your initials or just something memorable.
- A company address – what address do you want to be on the public records?
- Director’s details – have you decided who the directors are going to be?
If your setting up the business on your own, then this will just be you and therefore you’ll just need to fill out all your own personal details (date of birth, nationality, etc.)
- Shareholders – you want the company to be limited by share capital so that you can take out the profits tax-efficiently. The shareholders own the company and receive dividends. As with the director, you can start with you as the sole shareholder and you can chose the number of shares that you want. If its just you, one £1 ordinary share is enough.
- A credit card – it costs £12 to register the company on Companies House.
After you have done all this, Companies House will process the application . This can take a few days and then they’ll send you your Incorporation Certificate, which your clients may need to see before signing a contract.
You will also receive a 6-digit authentication code through the post – keep hold of this. You will need this code whenever you want to sign into Companies House in the future.
HMRC will then automatically be notified of your new company. They will write to you with your company’s Unique Taxpayer Reference which you will need to be able to file a tax return next year as well as for some of the steps we will take today.
Registering for PAYE
The most efficient way of taking money from the company is by paying yourself a small salary each month and then taking the rest as dividends.
Where do you do this?
You will need to register a payroll with HMRC through the Employers section of the HMRC website
What you need to do it?
You will need all the company details including the Unique Taxpayer Reference, and also your personal details again.
You will then need to submit payroll documents to HMRC monthly. You can so this online, through a payroll software, or by using an accountant.
Registering for VAT
When do you need to register for VAT?
You must register for VAT is your VAT taxable turnover is over £85,000 in a 12-month period. Even if your business turnover is below £85,000 you can register voluntarily for VAT.
If you’re not sure, whether to do this, you may want to get some expect advice for an accountant.
Where do you do this?
Again, you can do this on the HMRC’s website – it’s the same place for registering for PAYE, so you can do it at the same time.
What do you need to do it?
You will need all the company’s details again, including the Unique Taxpayer Reference and your personal details.
You will then submit VAT returns to HMRC, usually quarterly. You can do this through an accountant or through your government gateway on HMRC’s website.
Opening a business bank account
Your business will need its own bank account as it is a separate legal entity. You can then use this bank account to pay for all your business bills and transactions, for example:
- Your salary
- Dividends
- Payments to HMRC for VAT, Corporation Tax and PAYE/NI
- Repaying your personal expenses, e.g. mileage
- Paying other business bills, e.g. mobile phones and travel expenses
How do you choose your bank account?
It may be easier using the bank that you already have your personal account with, but that doesn’t always mean the best solution. Here are a few things you should consider:
- Bank Charges – Usually free for the first year then you pay monthly fees and charges depending on transactions.
- Online Banking – Check you can get online access to statements and can make payments online without extra charges.
- Phone Banking – Can be convenient if you aren’t near your local branch but have enquiries.
- Location and bank manager – Having a face-to-face approach, asking about any other enquiries. A helpful bank manager can be very useful.
- Interest paid to you – Check the rates you’ll receive back on any cash in your account.
When you’ve chosen the bank, you can set up the account.
Where do you do this?
You will usually need to go into the bank to do this as there are some security procedures that you’ll need to follow. However, ring first or apply online as there is often a delay in getting an appointment as start-up managers deal with a lot of businesses.
What do you need to do it?
You’ll need all the company details, Certificate of Incorporation that Companies House issued you, your Memorandum, Articles of Association and Share Certificates – you’ll have received all of these when you registered the company.
The bank will also need to do some security checks on you personally – they’ll need to see some photographic ID (passport or driving licence) and proof of address.
Insurances
Depending on your nature of work and your clients, you may some insurance.
Even if your clients don’t require it, you should at least consider Professional Indemnity Insurance which will cover you against any claims from your clients.
You may also want to look at Public Liability Insurance for the company and now you’re self-employed, you might want to check insurances for loss of earnings if your unable to work, due to illness for example.
Finding an Accountant
You can do all the bookkeeping yourself and submit the relevant returns to Companies House and HMRC – these can include accounts, Corporation Tax returns, VAT returns and payroll submissions.
Or you might want to concentrate on what you do best and use an accountant for all the other stuff. You will also be able to get advice from your accountant to make sure your company and personal finances are as tax-efficient as possible. They should help you fully understand all the numbers, should be available throughout the year and of course making sure you meet all the HMRC requirements and deadlines.
How do you choose an accountant?
- Size of firm – Apple wouldn’t pick a one-man band accountancy firm in Liverpool. And a global firm of accountants wouldn’t be right for a small business in Liverpool. It makes sense to pick an accountancy firm that works with businesses of your size.
- Their experience – do they have experience with your type of business and in your sector? Make sure they’re able to give you relevant advice.
- Fees – cheapest isn’t always best.
- Recommendations – if anyone that you know has used them, ask their opinion. Otherwise, check out testimonials on their website or ask them if you can speak to a current client.
- Relationship – make sure that you can work with this person on a day to day basis, trust them and value their advice.
Where do you do this?
Ask a friend and colleagues. Or have a look on their website.
What do you need to do it?
It is possible to speak to an accountant before you set up the company. They will need to do some of the same security checks as a bank, so you’ll need photographic ID and proof of address.
If you already up and running, you’ll also need all the company details so that they can start work.
What can go wrong?
There are a number of common pitfalls in setting up a Limited Company:
- Getting the share capital wrong – this can be costly as the tax efficiencies are based on shares.
- Getting the salary wrong – most companies pick a whole round number, eg £1,000 a month and pay more tax than necessary.
- Choosing the wrong VAT scheme – there are lots of different schemes. You need the one that’s best for you.
- Delaying VAT Registration – some customers like to see your VAT registration before you start a contract.
- Setting up a PAYE scheme but missing a monthly submission to HMRC – fines can add up quickly.
- Underestimating the waiting time for a bank account – can be a que for a few weeks to meet with a start up manager.
- Not getting correct insurances – we all hope that nothing is going to go wrong but sometimes it does and its useful to be covered.
- Failing to claim for the allowed expenses to reduce your tax bill– an accountant can help you with this.
Hopefully, you now feel confident enough to set up your limited company and start trading. But, sometimes, it does pay to get expert help. If you do need anything, please do get in touch.