So you’re looking to start up a new Ltd Company to trade as? Great, please read on.
I’m going to do my best to surmise the steps, some legal and obvious, others simply good practice, for setting up a Ltd Company. I’m not offering legal advise here so please take it upon yourself to do your own research and speak with qualified experts. What I do hope is that this will at least give you a useful checklist of things to consider. And in case there was any doubt, this is specific to setting up a UK Ltd Company.
Asking the obvious, what is a Limited (Ltd) Company?
A Limited Company is an organisation with limited liability for the Company Directors/Owners. It means you as a Director are not personally liable for any financial losses made by the business. This is because a Ltd Company is a distinct entity from its owners. A caveat to this is quite often business loans and borrowing look for you to personally sign a guarantee, so well worth reading the small print. A commercially driven Ltd Company will also be of the ‘Limited by shares’ variety, whereas if you want to trade as a ‘not for profit’ you will likely be a ‘Limited by guarantee’ type (further reading).
If you want to read in a bit more detail what a Limited Company means, you can read the Companies House blog.
Check what names are available
Once you’ve figured out that awesome new Company name (read my previous article) you need to double check its availability. You can use the Companies House name checker to make sure that name is still available.
Register your Company
You can either ask your accountant to register the Company for you, that’s if you have one. Alternatively you can do this yourself via the gov.uk website for the sum of £12 (link here). The new gov.uk website is a million times better than when I formed Pixelfish and they have some useful guides for setting up Companies themselves. It’s also worth stating that when you register the new Company you will also be registering for Corporation Tax at the same time.
Choose your Directors and Shareholders
Make sure to add in all the Directors of the Company and double check spelling and details are correct. You can also assign shares at the same time. We’ve typically created 1000 shares and split them however we have previously planned. If you have an accountant they can recommend and help how you may want to structure this. Advice seems to differ a little on this.
Get business insurance
Now you’re a trading Company, make sure to get the necessary insurances to cover yourself and the business. These will likely include; Indemnity, employers, public liability and contents at the very least. I’ve used Hiscox Insurance for 10 years and can’t fault them but as with all insurances, it’s often worth shopping around.
Get an accountant
It’s worth its weight in gold to have a qualified accountant submit your annual returns. Using a good accountant will ultimately save you money. One area you could look to save some money is by taking on the bookkeeping yourself, only you will know if you have the time or inclination to do so. If you do choose to, I highly recommend using platforms such as FreeAgent and Xero. I’ve used both and personally preference FreeAgent for running a small Ltd Company. You can get 10% off a FreeAgent subscription with my referral code here in case you’re in the market for one.
To VAT or not to VAT
I’d almost always recommend registering for VAT. It’s likely you will be required to anyway due to your turnover exceeding the VAT threshold (currently £85k+). But in case you run a small operation, I believe it adds value to be VAT registered. It gives you a chance to claw back some money whether it’s by VAT on purchases or via the flat-rate scheme. Remember you can also take advantage of back dated business VAT expenses for up to 4 years before becoming VAT registered. This can be a most welcome cash boost in the early months. Lastly I do believe becoming VAT registered contributes to an enhanced perception, it shows you mean business, so even if your turnover is currently below the threshold, you’re aiming for bigger things.
Remember your responsibilities
Once you’ve set up and created your new Ltd Company, you’ve started what will be an ongoing legal responsibility by you and your fellow Directors. You will need to make sure annual returns are submitted on time, payment of any taxes paid without delay and updating Company details as soon as you move registered offices or Directorships change.
Everything is set up and good to go, there’s now nothing to stop you from trading and making some money! Starting and running a Company can be a really empowering thing, so embrace the new responsibility and become one of the many success stories out there.