For sole traders, it is an exciting time when you reach the point of taking on new staff or renting larger premises. You may find your business is growing and you need to consider setting up a limited company. Although this is not the right move for all businesses, setting up a limited company could be the right move for you. However, this new undertaking does not come without its responsibilities and new processes. It can be tricky understanding how to set up a limited company, what to do first and where to sign up. To help guide you through this new process, let’s take a look at the initial steps you’ll need to take in order to set up your new limited company.
Name your business
Firstly, you will need to decide on a company name. This is the creative part and will encompass your new company’s identity. Be sure to check on the HMRC website that your company’s name is not already in use. Remember, it also must include ‘Ltd’ or ‘Limited’ in its official name.
Who will be the director and the shareholders?
All limited companies must have at least one company director, who is liable for the company and tasked with making company decisions and filing accounts. You must also appoint at least one shareholder; this could also be you even if you are company director as well.
Register with Companies House
You will need to complete an online form to register with Companies House, which usually costs £12. To do so, you’ll need to have certain details to hand, like the company’s registered address and information about the directors and the shareholders. If you haven’t already, this is also where you’ll be registered for corporation tax.
Register with HMRC
Even if you’re the only person currently working in your new limited company, you will need to register as an employer with HMRC. This will mean you are given a PAYE reference number and subsequently you’ll pay national insurance and income tax.
You’ll also have received a certificate of incorporation from Companies House to confirm the existence of your new limited company, which you’ll need when registering your company with HMRC.
Be sure to have the correct business insurance
Although we advise seeking out the best insurance policies to make sure your new limited company is fully covered for any eventuality, you are only legally required, as a small business, to have employer’s liability insurance.
Set up a different bank account
If you haven’t done so already, when setting up a limited company we would advise you separate your personal and business finances. Set up a business bank account which should be in the name of your new company. Make sure you read up on the bank’s rules as there are different regulations when opening a business account.
Register for VAT
You’re legally required to register for VAT when your annual turnover is at least £85,000, so you may not need to register straight away. However, it can be preferable in certain circumstances to register early as it can improve cash flow in the long term and often, a VAT registered company is seen as more trustworthy and reliable to prospective clients and customers.
This is an easy-to-read starter guide if you’re about to set up a limited company for the first time, and whilst this can be the start of an exciting new venture, or the product of business growth, it may also feel overwhelming and complicated. You may want to seek the advice of an accountant to help you with this transition. For more information on the company set up services we offer, and how we can handle the process for you, call us on 01491 578207.