Setting up your own limited company can be nerve-wracking, but also the most exciting step in your career so far. Since the pandemic, more and more people are deciding to follow their own dreams, hoping for a better work/life balance.
For 49%, flexibility is the main factor driving their interest in going self-employed or freelancing, and 48% want to be their own boss.
However, you need to ensure that setting up a limited company is done properly, to ensure everything is above board and you’re paying the right amount of tax to HMRC.
The first thing to do is to submit an application to Companies House, the registrar of companies, and to do so, you need to have the following information to hand to ensure your formation is processed correctly with no delays.
You can submit your application directly, either electronically via the Companies House website, or by completing Form IN01 manually.
Alternatively, you can use a third party to process the application on your behalf, typically a formation agent or your accountant.
At Gorilla, we can do all the legal work to help you officially set up your chosen company. We will do all the paperwork so you can focus on other aspects of your business and you don’t have to second-guess whether you are doing everything correctly.
However you decide to incorporate your new company, you’ll need to provide the following information to Companies House:
1. Company Name
Your company name must be unique, and not contain any sensitive words or phrases such as trademarks. It is also important not to pass yourself off as something you’re not.
Choosing a name for your company can be difficult, so it’s worth spending some time combining relevant words and names until you find something that you like. From there, give it a Google search, check Companies House and search for it on Facebook, Instagram, Twitter and LinkedIn to ensure there is no one else calling their company the same name.
2. Company Address
You must have an address where official mail can be sent. This could be an office space, residential address or a third part service.
If you’re setting up a company in England or Wales, then the registered address must be within one of these countries. The same applies for Welsh, Scottish or Northern Ireland-based companies – the registered office address must be in the corresponding territory.
3. Company Officials
To form a company, you must have at least one director. You may also decide to appoint a company secretary, although this is no longer mandatory.
To set up your company, you will need to have all your officials’ names, addresses, nationalities and dates of birth to hand when you apply. If there are concerns about privacy, directors can elect a service address so that they do not have to put their residential address on the public record.
4. Decide a Share Structure
You need to decide how the shareholdings in your new company are apportioned and declare this at the point of setting up your company. There are lots of things to consider, such as whether you will own all of the shares yourself, split them with a spouse or require different classes of shares.
When you declare dividends, they must be distributed exactly in the same proportion as the shareholdings. If you’re not sure on the best way of setting up the share capital of your company, your accountant at Gorilla can help.
5. Provide details of Shareholders
For each shareholder, you will need their name, full address details, class of share, and the number of shares they will own.
In addition, you will need to provide three pieces of personal information (in lieu of a signature). These include birth town, last 3 digits of telephone number, National Insurance Number or Passport number, mother’s maiden name, eye colour, or father’s first name.
6. PSC Register
All companies must now keep a record of all ‘People of Significant Control’. This record includes all people who own 25% or more of the shares in a limited company, or have 25% or more of the voting rights.
Following the initial formation, this information is updated via the Confirmation Statement which all companies are required to submit to Companies House each year.
7. Articles of Association
All companies must have a set of Articles, which act as a ‘rule book’.
This governs all aspects of running the company and includes details on the director’s powers, shareholders decision making and how dividends are distributed.
You can elect to use a generic document (model articles), which are usually sufficient in the majority of cases.
8. Memorandum of Association
This is an agreement which confirms the intention of initial subscribers to form a limited company in the first place. The following wording needs to be used:
Each subscriber to this memorandum of association wishes to form a company under the Companies Act 2006 and agrees to become a member of the company and to take at least one share.
This is followed by a list of all subscribers.
When you enter the details of each shareholder during the online formation process, just ticking a checkbox confirms that the shareholder has authenticated the prescribed form memorandum of association. There is no physical document to submit.
9. Standard Industry Classification (SIC) Code
Each trade/industry has a unique SIC code to identify what a business does. You can find the full list on the gov.uk website here.
You can add up to 4 SIC codes to describe your business, although a single code will often suffice for most contractor companies.
10. Know your obligations
When setting up a limited company, you need to make sure you know what your legal and financial obligations are as a company director.
Anyone can be a director, as long as they are over 16 years old, not an undischarged bankrupt and not disqualified from acting as a company director for whatever reason.
You don’t need to be a shareholder of the company to be a director but in practice many limited company contractors are sole directors or co-directors with other fee-earners, or often a spouse will serve as a second director.
As a company director, you have a number of responsibilities to the company itself, any employees you may have, and your shareholders. These include keeping accurate records, following the company’s rules and trying to make the company successful using your own abilities, skills and independent judgement.
11. Find a good accountant
Owning a business can seem like a dream, but the financials around it can be complicated. For example, you need to register for Corporation Tax within 3 months of carrying out business via your company. You may also need to register for VAT. If you’re paying anyone a salary via your company, you will also need to register with HMRC as an Employer.
You’ll be pleased to hear that these are all tasks an accountant can do on your behalf – and as specialist accountants, Gorilla will register your company for all relevant taxes as part of the initial company formation process.
How You Can Benefit from a Specialist Accountant at Gorilla
Whilst starting a new business can be incredibly rewarding, it can also be a big challenge with many considerations.
It is important to make sure that you are as efficient as possible at any stage of a business’s development. If you can streamline it from the very beginning, including your accounting, you can give yourself a really good start.
Firstly, you need to get registered for Payroll, VAT, CIS and pensions. You must also inform HMRC that you are eligible for tax; if you don’t, you may be faced with hefty penalties.
We can help you remain organised, so you never miss a deadline. When operating as a limited company, there are many deadlines you must not miss, such as the self-assessment tax return deadline.
Not only must you navigate deadlines, but there are rules about keeping records of invoices, company assets, expenses and loans that are against the company as well, just to name a few of the things you need to keep in mind.
HMRC can request this information at any time and, depending on the type of information and the type of company you are running, this can mean presenting documentation from as far back as ten years.
We can ensure you never miss a deadline and keep all the required information, and we can also help identify opportunities to claim tax relief and other financial relief.
We partner with FreeAgent
By joining Gorilla, you’ll have full access to FreeAgent at no extra cost.
We have partnered with FreeAgent to provide our clients with the latest cloud bookkeeping software on the market. FreeAgent is trusted by over 60,000 freelancers, contractors, and small businesses.
Once you are running your company, you will need to start invoicing clients and tracking payments. FreeAgent also automates processes and can be accessed from anywhere at the drop of a hat, providing you have your mobile phone with you.
Ready to sign up with Gorilla? You can do so by clicking here or calling us on 0330 107 9672.
