If you have chosen to work for yourself as a contractor and have determined that a limited company formation is the best for your new business venture, there are just a few other things that you have to keep in mind. Setting up a new limited company for contracting is not at all difficult and takes very little time, provided you know what steps to take.
In this article, we will explore the essential steps involved in setting up a limited company for contracting, from choosing a company name to registering with Companies House and opening a business bank account. Additionally, we'll discuss the importance of considering professional assistance, such as hiring an accountant for limited companies, to ensure the smooth operation and financial compliance of your contracting business. Let's dive in.
What is a limited company?
A limited company is a legal entity that does business under the name that you have chosen for it. In other words, your limited company is a moral person by law. It can make money, lose money, take on debt and pay taxes just like a real person. The limited company also has its own bank account.
How to begin setting up a limited company
In order to get started in setting up your limited company, you must first choose a company name.
You will need to determine what name is best for your new company and who is going to be part of that company. Choose a name that relates to what your company will be doing and ensure that the name does not contain any words or phrases that could be deemed misleading or offensive.
Once you have chosen a name, you will need to appoint a director who will oversee the operation of your new company.
Registering your limited company
If you are planning to set the company up yourself with the help of an accountant or a company formation agent, you can go online to Companies House and submit your information to register your company.
You will need to have the business name as well as the name and address for your chosen director or directors and information for your shareholders.
Companies House offers online forms that you can fill out, with an online guide to help you in the process.
You will also need to draft your Articles of Association and file this with Companies House. The Articles of Association is a document that outlines why you have chosen to set up your limited company and how it will be operated. The document simply states details about your company and can be done by yourself or your accountant if you have one.
If this all sounds confusing then it can be best to enlist the help of an accountant from the offset. They can explain how limited companies work and can do your books and taxes for you. Alternatively you can use a company formation specialist. If you are setting up a ltd company from abroad then a specialist like Your Company Formations will handle much of the admin for you along with assistance and explanations.
Open a business bank account
You also need to open a business bank account and register your company for VAT. You can register for VAT online at the HMRC website and this is a very simple process, as well. You will need VAT registration in order to charge your customers or clients VAT. If you are using a professional accountant, he or she can handle all of this for you. If you are doing the financials yourself however, you can make the calculations yourself on the website and there are calculators to help you to determine the right amounts to enter.
Keep records of expenses
Finally, you want to determine what start up expenses that you may have and plan to acquire these expenses. As a contractor, you may not have any upfront start up expenses depending on the company that you are forming. These startup expenses can be claimed against your future revenue when you are filing your income taxes so keep good records of everything that you spend to get your business off the ground.
Accountant for Limited Companies
Once you've set up your limited company for contracting, one of the crucial steps is to consider getting an accountant. An accountant can provide invaluable assistance in managing your finances, ensuring compliance with tax regulations, and maximising your tax efficiency. They can help you navigate complex financial matters, such as tax deductions, dividends, and VAT registration, leaving you free to focus on growing your contracting business.
When selecting an accountant for your limited company, it's essential to choose one with experience in dealing with contractors and knowledge of the specific tax implications and regulations that apply to your industry. They should be able to offer tailored advice and support to help you make informed financial decisions and minimise your tax liabilities.
Additionally, having an accountant can provide peace of mind, knowing that your financial affairs are in capable hands and that you're fulfilling your legal obligations as a limited company contractor. They can also save you time and hassle by handling paperwork, filing tax returns, and keeping you updated on any changes to tax laws or regulations that may affect your business.
In summary, while setting up a limited company for contracting may be straightforward, enlisting the services of an accountant is a prudent step to ensure the financial health and compliance of your business. With their expertise and guidance, you can confidently navigate the complexities of running a contracting business while maximising your earnings and minimising your tax burden.
Setting up a limited company for contracting can be a rewarding endeavor, offering numerous benefits such as tax advantages, limited liability, and increased credibility. By following the steps outlined in this guide and considering the assistance of an accountant, you can establish your contracting business with confidence and set yourself up for success in the competitive marketplace. Remember to stay informed about legal and financial obligations, keep accurate records, and seek professional advice when needed to ensure the smooth operation and growth of your limited company.