Company Set Up
When setting up a limited company, it's vital to understand your options for company structure, register for taxes, appoint directors, and other key considerations. Our comprehensive guide explores these essential steps to help simplify your journey.
Setting up a limited company offers numerous advantages, allowing you to present a professional image to your clients and optimising tax efficiency. However, before diving into the process, there are some key factors to consider.
Firstly, you must appoint Shareholders and Directors and provide HMRC with a registered company address. Additionally, you must also decide which limited company structure you’d prefer to adopt:
The three primary types of legal entities are:
- Private Limited Company (“Limited” or “LTD”).
- Limited Liability Partnership (LLP).
- Company Limited by Guarantee.
After successfully registering your company, it is highly advisable to establish a dedicated business bank account solely for your business-related transactions. Maintaining a clear separation between your personal and business finances is strongly recommended by our team, as it simplifies expense management and ensures smoother tax payments.
When selecting a bank account provider, there are some important considerations. These include the availability of schemes such as the Financial Services Compensation Scheme (FSCS) and Confirmation of Payee, as well as any additional transaction charges that may apply.
With a multitude of providers to choose from, you’ll be able to find the ideal bank account that aligns with your business requirements.
Register for Taxes
Once your limited company is established, it is essential to address your new tax obligations. Registering for business tax is the next crucial step in the setup process.
Below is a summary of the most common types of tax you will be required to pay. You can find further information regarding any potential taxes that may apply to you and your limited company dependent on your business activities in the ‘Taxes’ section later in this guide.
- Corporation Tax – All limited companies must pay UK corporation tax on their taxable profits. These must be filed as a corporation tax return to HMRC within 12 months of the end of your ‘accounting period’.
- VAT – The government has set thresholds in place for VAT registration and payment. If your VAT taxable turnover meets the defined value, you must register for VAT by law and charge VAT on all qualifying products and services. Voluntary registration is also available for your company if your turnover is below the set threshold. Any VAT due must be paid to HMRC by the due date, usually one month and seven days after the end of the VAT accounting period.
- PAYE – A mandatory system for employers, which requires you to manage income tax deductions and National Insurance Contributions at source before making a salary payment to your employee (how you draw your own salary and dividends as the company owner we cover in detail further in the guide). This is then submitted to HMRC on behalf of the employer by the 22nd of the following month.
Understanding your tax obligations as a new limited company owner can take time and effort. Our business tax advice service is available to ensure that you maintain tax compliance and make informed decisions regarding your tax obligations.
Find out more about tax in our UK Tax Rates, Tax Allowances and Tax Bands article.
Investing in comprehensive business insurance is crucial when starting your new limited company to help protect your business against unexpected events and potential financial losses.
Business insurance can cover many scenarios, including workplace accidents and general business interruptions. While it is mandatory to have Employers Liability Insurance (once you become an employer), it is also advisable to consider other types of insurance. These may include:
As detailed earlier in this guide, one of the essential steps in starting your new limited company is appointing company directors, as mandated for any UK-based company.
Directors play a vital role by acting on behalf of the company and undertaking various duties and legal obligations. They assume the responsibility of managing the company’s operations on a day-to-day basis and are accountable for the company as a legal entity.
While there are different types of directors, they all bear similar legal responsibilities. By understanding and fulfilling these responsibilities, directors contribute to the effective governance and compliance of the company.