If you’re thinking of becoming a contractor, your first step will be to establish a business from which you can sell your skills and get paid. This means choosing an operating structure.
There are two common operating structures typically used by contractors – a Limited Company or Umbrella Company.
As the director of a Limited Company, you will be responsible for managing the day-to-day running of the business and submitting the necessary financial paperwork. These documents include, Self-Assessment Tax Return, Corporation Tax Return, Company Accounts, Quarterly VAT Returns and Payroll.
You will also be legally responsible for any debt that lies with the company, but this will be limited to the amount of capital invested in the limited company.
This structure allows control over financial affairs and requires more management than working through an Umbrella company. As the director, you will oversee the distribution of funds, issue invoices, submit expenses, and on the whole, take care of the business.
For more information on how a Limited Company works, read our extensive ‘Limited Company Guide for Contractors’ page.
If you’re looking to begin Limited Company contracting, the first step is to form your Limited Company.
Choose a Shareholder and Director
You need to choose a Shareholder and a Director. These can be different people or these can be the same.
A Shareholder will own the company. This can be in part or whole.
The percentage they own is represented by the number of shares they hold in the company.
A Director will manage the day-to-day running of the Limited Company and they will be legally responsible for submitting the necessary financial paperwork.
When forming your Limited Company, you will need to decide on a Registered Office address. Official documents will be sent to this address such as those sent by HMRC.
You can register your own address, your accountant's, or sign up for a registered office service.
FAQ: Should I use my personal address?
Some contractors decide to use an address other than their own as this information will be publicly displayed on Companies House. By doing this, it draws a line between your working life and personal life.
Choosing a registered office address can be beneficial if your rental agreement doesn’t allow you to use the landlord’s address as a registered office.
If you decide to use your personal address, but then decide against this in later life, it will be difficult to claw back this information as it will already be in the public domain.
If you use the address of your accountancy firm, this will mean that your accountant will have instant access to your financial documents. This will allow your financial affairs to be dealt with promptly, saving you time and money, rather than posting them separately to your accountant or scanning them over.
An external registered office service can be used for an additional cost.
If you appoint a specialist contractor accountant, they will take care of forming your Limited Company. If you decide to elect the long-term services of an accountant, they will handle your tax affairs for the financial year.
At Gorilla Accounting, as part of our all-inclusive package for just £89 + vat per month, we offer the following:
Typically, your next steps will be, opening a business bank account and taking out business insurance.
As the business is a separate legal entity to you, you will be required to open a separate business bank account from which you will get paid – as the director. You will receive money from your clients through this bank account.
At Gorilla Accounting, we work with specialist insurance providers that we can introduce to you.
There are three common insurance policies taken out by contractors:
We work with specialist insurance providers that we can introduce to you.
If you’re ready to take the next step and form your limited company, get in touch with a member of our New Business Team by calling
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