What do I need to know about setting myself up as a Ltd Company?

[thefoxandtherose]

I'll be doing the same role as I do already, but on a self-employed basis through an agency. I know, from other agency worker that I have spoken to, that I need to set myself up as a Limited Company and hire an accountant. I have been given the impression that the agency/accountant will deal with the majority of the Ltd Company part, but I'm not sure how savvy I need to be about it all myself. Shitting myself, frankly.

Relax, it's really simple! I started a Ltd company when I went freelance as it's more tax-efficient, and lots of companies I worked for at the time insisted on hiring only Ltd companies.

I used an accountant for starting mine and he handled (and still does) everything. But I also know people who have done it themselves, which is cheaper.

For me, personally, I wanted the reassurance of knowing all the Is were dotted and Ts crossed, so an accountant was the right choice. I'm the least financially-savvy person, so if I can do it with the help of an accountant, you should be able to :)

This page: www.talentedladiesclub.com/all-help/how-to-set-up-a-ltd-company/ explains how to set up a Ltd company and what you need if you want to do it yourself.

Uh, would help if I added the page as a link :)

www.talentedladiesclub.com/all-help/how-to-set-up-a-ltd-company/

if you pick the right accountant you need know very little - they should explain it to you. I don;t expect clients to know anything - but I do expect them to listen to what I tell them!

Don't go to a company charging hundreds of pounds - some accountants or competent qualified book-keepers will do it for less and explain more to you.

And don;t fall for the marketing - "we can get you a company up and running same day" anyone can do that these days.

lovefreelance - that looks like a really good website - I might start using it. But techncally a couple of things on that page link aren't true, you don;t need the "mem and arts" if you dont have one COmpanies house will default to the standard ones you can print off

The first question I would ask any accountant is based on your likely turnover and type of business is a Ltd company the most tax efficient way to go it. It is not always for some sole traders or partnerships are more tax efficient. I say that as a sole trader who turns over three quarters of a million and it is still the most tax efficient way for me and the type of business I am in.
Yes, you don't need to know anything, but the more clued up you get the more you can reduce your fees and sometimes accountants can make mistakes and you need to be able to understand a reasonable amount to spot any mistakes.

Now I'm fascinated by what type of business you're in Lonecat because not being better of with a limited company above a profit of say around £25,000 is unusual.

Also limited liability company has the advantage of ... well limiting your liability!

And yes you can reduce your costs if you are more financially savy but you don't have to be.

I should add that if you are only setting up a company to work for one client in the way an employee normally would then you run the risk of falling foul of the IR35 anti-avoidance rules and may end up paying NI anyway (which is the main saving)

Lonecat - that's stumped DH (tax adviser), as he can't think of any industry where being a sole trader would have more than a marginal benefit, more than the protection of a Ltd Co. He'll be pondering that all night now .

Depending on what you are doing, what your turnover is, and how much of that turnover you need in your bank account each year, you may want to consider using an umbrella company - then you don't have the hassle of running your own.

We are out there. Needless to say it is an industry where being a Ltd company is viewed with huge suspicion and obtaining a credit line as a Ltd can be very difficult. Some use LLPs, but even these are viewed with a great deal of suspicion.
I have recently weighed all of this up with my accountant and the benefits of being limited do not out weigh the the advantages.
There are around 3500 trading as sole traders or partnerships in UK.

I'm not saying you're wrong Lonecat - just interested in what you do [great big fat nosey emoticon]

I'm not expecting you to tell me by theway!

Highjack - Kewcumber, do you have any idea where I can find an accountant type person who can do all our invoicing, bank reconciliation, and vat returns? Is there a website where freelance accountant advertiser their services?

I'm better off being a sole trader too... Depends on the industry you're in OP!

No quint no website I know of.

If there a reason you don't want to use me?

I'm about the cheapest proper accountant you'll get - a book-keeper may be a tad cheaper (not always) but they are more hit and miss in quality terms. You can find a certified book-keeper through www.bookkeepers.org.uk/ which at least guarantees they have received a certain level of training. Ideally someone recommended as I have sorted out some very dodgy book-keeping in the recent past locally.

Aren't you in finance yourself? Or just not enough time.

KC - not enough time! This is mind-numbingly boring stuff involving logging stuff in excel - as our chartered accountant who do our annual accounts prefer that! Also, I have moved into a more marketing related role, and need to find somebody who can take over what I have done the last 10 years, including some management reports with bells and whistles! I think you are more senior than this sort of stuff? But would love to work with you if you are interested.

Stuff what your accountant wants - you are his client not the other way around! Not sure if it would work for both of us but I'll PM you with some suggestions. Not many local good bookkeepers around - which is why I pick up business from local accountants - despite being an accountant rather than a book-keeper.

Sorry hijack over.

Kew I work in the animal health industry sometimes subcontracted to AHVLA sometimes by choice and sometimes by emergency powers as well as providing services to private clients. I work in a world with suppliers having bizarre and complex discount schemes. There are also long established tax write downs for partners/sole traders on a wide variety of items due to offering 24/7 services as required to by law.
The only Ltds in the industry are massive groups with huge purchasing power. Just about all of the rest of us are sole traders or partnerships.
I use accountant that specialises in this area.

Thank you lonecat - I'm slightly relieved that it isn't a sector I deal with - makes me feel slightly better. I did wonder if you were a doctor - so not too far out!

Us and doctors our allowances are pretty tricky to get your head round.

In case you don't want to pay an accountant, or want to know your options, this is from memory a list of the things I first had to do:

• Register a company with Companies House, this is very straightforward and quick
• Register on the HMRC website, then
• Register your company for VAT, and
• Get the HMRC software for calculating PAYE
• Register yourself as an employee (filling out the new employers part of your P45 from your old employer)
• get a bank account. This took the longest, if I had got a overdraft and/or CC it would probably have been even worse.
• a company has to have initial share capital (£1 per shareholder is enough) so you have to pay this into the account when it's open.

There are lots of HMRC guides on various aspects, most of them quite readable, eg 'all the things you have to do before paying someone for the first time'. Sounds like you will be covered by IR35 (tax rules for people working for one company through their own companies, where their situation is similar to an employee) so you should find out about that.

Start keeping records of any expenses. Keep receipts for everything - it will be advantageous to pay 'yourself' back from your company when it has made some money. Keep all the letters you get and find some way of dealing with the various passwords, PIN numbers and logins. You need to keep various records such as your P45s. You will need to make payslips for yourself as well as VAT invoices for your client. Find some accountancy software or start out with Excel. You can get an accountant to cast an eye over your accounts at a later date, without paying them to set up the company.

PAYE has to be paid by the 22nd of the next month, and VAT has to be paid by the start of the month after, eg if you receive a payment from your customer in May you have to pay the VAT on it by about July 7th, if you pay yourself a salary in May you have to pay the tax and National insurance by 22nd June. Put the money aside as soon as you know how much it is.

If your turnover is quite small you can apply to pay VAT quarterly instead of monthly. You should also apply for fixed rate VAT, which will save you money if most of your company's income gets paid to you as wages or dividends, and also slightly reduces the paperwork.

Please someone say if I have forgotten anything crucial!

Oh dear.

"- Register a company with Companies House, this is very straightforward and quick" - so far so good, but unfortunately after that most of it is either wrong or dangerously oversimplified.

Go on MrAnchovy

Well my initial thought is if your turnover is small you don't need to pay VAT.
Paying some really good advice at the start if you never run a company at the start can save you potentially thousands in the long run - for example paying VAT when you don't need to.

Particularly if your clients are NOT VAT registered - then you just become 20% more expensive to them. If they are VAT registered then volunteering for flat rate scheme can actually make you money but you have to factor in paying someone to do your VAT returns or doing it yourself.

Good points Lonecatwithkitten and Kewcumber. Registering for VAT made sense in my particular situation but doesn't always.

Kewcumber joining the flat rate scheme does reduce the burden of VAT returns somewhat.