Most business owners will go one of two routes when setting up their business: sole trader or limited company. Of these two methods, setting up a limited company, which is also called a limited liability company, is the more popular option.
In a limited company, the liability of the company directors is “limited”. The business owner’s finances are separate from the company finances. Those who run their business as a sole trader (i.e. are self-employed) do not receive this luxury.
Limited companies have additional benefits: the company shareholders cannot be held responsible for debts accrued by the business and limited companies are taxed at lower rates than those set up as sole traders.
The next piece of good news is that setting up a limited company is a relatively fast process.
How To Register As A Limited Company
Companies House is the government body responsible for registering all limited companies in the UK. To set up a limited company, you will need to register through Companies House.
Registering a company is a simple and painless task. You can do it yourself or ask your accountant to do it for you. It is advisable to ask an accountant to help, because having an accountant work with you from the outset helps build a stronger relationship and understanding, which can benefit you as your company grows.
What Documents Will I Need?
There are a number of documents you will need to complete and send to Companies House to register your limited company. These are:
- Memorandum of Association: These include the names and addresses of those setting up the limited company.
- Articles of Association: These detail the rules of the company which have been agreed by the shareholders and officers. Most companies use standardised versions of Articles of Association although you can create your own version if you wish.
- Form IN01: This contains the details of the director, company shareholders and the company secretary (this is optional) as well as details of the share capital (this is only if the company is limited by shares).
This may seem overwhelming. However, for accountants the task is straightforward and they will often have pre-prepared copies of these documents.
The Companies House website provides detailed information about the registration process and will help you understand the finer details of the process.
What Are The Responsibilities Of A Limited Company?
Now that you have set up your limited company, there are some requirements that you and your company must fulfil:
- You must register the company with Companies House.
- Annual accounts from the company must be filed at Companies House
- Each year, you must complete an Annual Return Form. This ensures Companies House have up-to-date information about the company.
- If the company makes a profit, or has taxable income in a given year, you must inform HMRC.
- Each year, the limited company must complete an annual corporation tax return.
- Company employees must make National Insurance Contributions on any income they receive as well as pay income tax.
Set Up Your Limited Company Today
As you can see, setting up a limited company isn’t as difficult as it sounds. If you want to get access to all of the benefits of making your company incorporated, then why not get started today. In just a few hours, you can be the owner of a limited liability company!
Linda Carr is the Founder of Linda Carr Accountants, a Chartered Certified Firm of accountants based in Peterborough, which was established in 2009. Linda recognises the need for SME’s to be able to access a reliable accountants for an affordable price.