Setting up a Limited Company
Setting up a Limited Company is one of the most popular ways for contractors and freelancers to structure their business. Although it comes with legal responsibilities, the advantages outweigh these.
At Boox, we’ll help you take care of your Limited Company director responsibilities, leaving you free to run your business.
Advantages of setting up a Limited Company
The main benefit of operating through a Limited Company is the tax planning benefits it affords the directors and shareholders of the business.
When operating through your own Limited Company, it’s profits are subject to Corporation Tax at 20%. You can then choose to take a low salary, in combination with extracting the profits from your business in the form of dividends. Dividends are taxed separately and are not subject to National Insurance Contributions (NICs), thus minimising the amount of NICs you will need to pay HMRC.
Other benefits include:
- Expenses such as office rental are tax-deductible and you’ll also get tax relief on pensions and private healthcare schemes. You can also enjoy employee benefits like childcare vouchers.
- Becoming a Limited Company also looks good from your end clients perspective. Many clients only hire Limited Company contractors because it means they don’t have to treat them as employees for tax purposes.
- Limited Company formation protects your investment. If you have to cease trading, your losses are limited to what you invested in the business – this is known as Limited Liability.
- Your business name is protected by law, meaning nobody can trade with the same name, or anything close to what you have. Try this info to help if you’re not sure of the rules about naming a company.
How to set up a Limited Company
Setting up a Limited Company is a simple three-step process.
1. Your company name – choose a name that’s unique. Companies House has a list of words and expressions that you can’t use in your company name.
2. Documentation – there are three documents to submit:
- Form IN01 – the formal company registration form. This contains the basic legal information about your business
- Memorandum of Association – this confirms your shareholders intentions to hold at least one share in the company
- Articles of Association – your internal management guidelines, which are required by law
3. Registration – Once Companies House has checked all your documents, it will issue your Certificate of Incorporation.
Your alternative to this is to get someone to deal with this for you. If you decide to sign up for one of our accounting services for example, we’ll set up your business for free. All you need to do is think of a name, and we’ll do the rest.
For more information to understanding how you should go about getting started and setting up your new business, click below to download our free guide.