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.
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.