Many individuals who take the decision to work on a contract basis, rather than in a permanent position, choose to set up a limited company for a variety of reasons.
To begin with, trading as a limited company allows them full ownership and control. On top of this, shareholders have limited liability for the organisation's debts, meaning their personal assets are not at risk of being seized to satisfy creditors.
In addition, there are various tax advantages associated with setting up a limited company - although these could change in the future, which is something you need to keep in mind.
These are just some of the advantages associated with limited companies. It is essential that you are aware of the pros and cons of working in this way and you are absolutely sure it is the best way forward before you come to a decision.
If, after considering all of your options and you are satisfied that a limited company is the way to go and your circumstances allow you to work in this way, you will need to go about setting it up and an accountancy service provider can assist you in this process.
Before you can begin trading as a limited company - also known as a personal service company - you need to register with Companies House.
Below, we look at the steps you need to take and the documents you must complete.
1. Decide on the company officers
The officers of a company are those who have formally been appointed to run it and include the directors and company secretary if one is required.
As a private company, you will be required to have at least one director but there is no need to appoint a company secretary.
2. Choose a name for the company
Choosing a name can be a difficult process as there are certain criteria that you have to meet.
The name must be followed by the word 'limited', not bear any similarity to another company name registered with Companies House, not imply any connection with local or central government and exclude certain words.
It is a good idea to select a name before you fill in the required documents. You can check if it has already been taken by searching the index of business on the Companies House website.
3. Complete the required documents
There are various documents you must complete in order for you to register your limited company.
- Memorandum of Association - A statement made by each subscriber showing their intention to form a company. It includes details such as the name of the company and the type of organisation it is.
- Articles of Association - This document outlines how the company will be run, any restricted objects, shareholders' rights and information concerning the power of directors.
- Form IN01 - This form contains details such as the names and addresses of directors, initial shareholdings, statement of capital and the company's registered office.
4. Register with Companies House
Once you have completed the required documents, you must submit them to Companies House, which can be done through the Companies House software filing service.
Setting up a limited company is not an especially difficult process, however, what many contractors choose to do is engage the assistance of a company, such as PayStream, to help with the process.
Such organisations have a wealth of experience in setting up limited companies and will help with all administrative duties to ensure the whole registration process is as smooth as possible, so engaging their services is something you may want to give serious consideration to.