Whether you\u2019re switching over from being a sole trader or starting a business and looking to make it official, setting up a limited company can be confusing. So, how do I set up a limited company, you ask? We\u2019ve created the ultimate step-by-step guide for you to follow to cover all your bases.<\/p>\n\n\n\n
In some cases, you\u2019ll need to opt into being a limited company straight away. In others, you can wait. Figuring out which option is best for you can depend on a few things.<\/p>\n\n\n\n
What\u2019s a limited company? It\u2019s an organisation you set to run your business, which means you wouldn\u2019t be completely or wholly responsible for it. It creates a separation between your personal finances and debts and your business ones. <\/p>\n\n\n\n
In terms of tax liabilities, first, you need to decide how you\u2019re going to pay yourself:<\/p>\n\n\n\n
If you\u2019re a director<\/a>, you\u2019ll also need to pay National Insurance<\/a> for both yourself as an employee and as an employer.<\/p>\n\n\n\n What\u2019s a sole trader<\/a>? A sole trader is, you guessed it, a self-employed person! It\u2019s just a fancy (legal) way of saying it.<\/p>\n\n\n\n When you\u2019re a sole trader, the legal line between your business finances and debts and your personal ones is blurred. To be frank, it\u2019s almost nonexistent. <\/p>\n\n\n\n Tax implications for a sole trader are a little different. You\u2019ll pay Income Tax on your self-employed income, minus allowable expenses. <\/p>\n\n\n\n For National Insurance, you\u2019ll need to pay Class 4<\/a>.<\/p>\n\n\n\n Before we even get into the documents you need, the websites you have to visit and the people you need to talk to, HMRC<\/a> has a list of things they recommend you do to get your limited company affairs in order from the get-go. <\/p>\n\n\n\n We like to call this stage, pre-preparation. It never hurts to be overprepared!<\/p>\n\n\n\n Here\u2019s HMRC\u2019s list:<\/p>\n\n\n\n It\u2019s completely up to you how you want to run your company, how many directors you want, etc. Usually, when starting off, limited companies will have just one director (and alas, no secretary) – that would be you, the owner. Let\u2019s carry on.<\/p>\n\n\n\n The two types of records you need to keep are company records and financial\/accounting records. Specifically:<\/p>\n\n\n\n HMRC does random checks to make sure you’re paying your taxes properly by checking your company and accounting records.<\/p>\n Get a professional, accredited accountant to make sure all your records are in order and to sort and file your company tax return and annual accounts to HMRC and Companies House, respectively.<\/p>\n<\/div>\n <\/div>\n\n \n \n These documents are usually kept at the company\u2019s registered address. If that\u2019s not the case for you, you\u2019ll need to let Companies House <\/a>know. <\/strong><\/p>\n\n\n\n \ud83d\udea8You can be fined \u00a33,000 or disqualified as a company director by HMRC if you do not keep accounting records.<\/p>\n\n <\/div>\n<\/div> \n\n You need to keep records for 6 years from the end of the last company financial year they relate to. <\/p>\n\n\n\n Sometimes, you might have to keep them longer if:<\/p>\n\n\n\n \u2026 by using Taxfix! An accredited accountant will your company return on time, or request an extension if possible, to make sure you\u2019re filing correctly and on time.<\/p>\n<\/div>\n <\/div>\n\n \n \n If you cannot replace your records after they were lost, stolen or destroyed, you must: <\/p>\n\n\n\n Now we\u2019re talking! This is where your business is being officially introduced – world, meet the new business. New business, meet the world. <\/p>\n\n\n\n First, you\u2019ll need to register an official address and email address for your company and choose a SIC code. A SIC code identifies what your company does<\/a>. <\/p>\n\n\n\n The address you register must be:<\/p>\n\n\n\n You can\u2019t use PO box addresses to register your company. <\/p>\n\n\n<\/div> \n\n \ud83d\udea8Your company could be struck off the Companies House register if you don\u2019t provide a registered office address that meets all the requirements.<\/p>\n\n <\/div>\n<\/div> \n\n Remember, your company\u2019s registered address is publicly available on the online register. To keep your home address private, you have two options:<\/p>\n\n\n\n You must have the address sorted before you register your company.<\/p>\n\n\n\n You\u2019ll also need to provide an email address. It won\u2019t be public info, but make sure it\u2019s accessible and you keep up to date on any emails you receive. Companies House can sometimes contact you via email about your company. Still asking yourself, “how do I set up a limited company?”? We’re almost there!<\/p>\n\n\n\n You can register your company <\/a>with Companies House through HMRC\u2019s website and register for Corporation Tax together. You might also need to register for VAT<\/a>.<\/p>\n\n\n<\/div> \n\n If you\u2019ve already registered your company but still need to register for Corporation Tax, you can follow this HMRC guide<\/a> using your business tax account.<\/p>\n\n <\/div>\n<\/div> \n\n Yipee, you\u2019ll get a \u2018certificate of incorporation\u2019. This confirms the company legally exists and shows the company number and date of formation. <\/p>\n\n\n\n You\u2019ll need at least 3 pieces of personal information about yourself, your shareholders or guarantors:<\/p>\n\n\n\n Register here!<\/strong><\/a><\/p>\n\n\n\n You can also register by post (it costs \u00a371 which you\u2019ll have to pay by cheque made out to \u2018Companies House\u2019 and takes between 8 to 10 days), using an agent, or even using a third party. <\/p>\n\n\n\n How do I set up a limited company? Well, you’re the expert now! And, you also know what records you need to keep. We can\u2019t think of a cleaner, smoother start than that! <\/p>\n\n\n<\/div> \n\n <\/p>\n And who better than one of our accredited accountants? Use our limited company tax returns service<\/a> to sort your annual accounts and corporate tax return. All for a low, fixed price.<\/p>\n <\/p>\n<\/div>\n <\/div>\n\n \n \n Choosing to stay a sole trader<\/h3>\n\n\n\n
Step 2: The pre-preparation<\/h2>\n\n\n\n
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Step 3: Records you\u2019ll need to keep<\/h2>\n\n\n\n
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Don’t get caught out by HMRC’s random compliance checks<\/h2>\n\n \n \n
Company records<\/h3>\n\n\n\n
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Financial\/accounting records<\/h3>\n\n\n\n
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Avoid sending a late company tax return\u2026<\/h2>\n\n \n \n
What do I do if my records are lost, stolen or destroyed?<\/h3>\n\n\n\n
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Step 4: Almost ready to register your company<\/h2>\n\n\n\n
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If you want to keep your address private<\/h3>\n\n\n\n
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Step 5: Register your company – hooray!<\/h2>\n\n\n\n
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Other important information:<\/h3>\n\n\n\n
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Other things you can do as you register:<\/h3>\n\n\n\n
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Other ways to register<\/h3>\n\n\n\n
Congratulations, you\u2019ve officially registered your company\ud83c\udf89<\/h2>\n\n\n\n
It\u2019s always worth getting a tax professional to sort this<\/h2>\n\n \n \n