How to Set up a Company
When you go into business for yourself one of the first things you need to decide is how you will structure your venture. Whether you chose to be a sole trader, set up as a partnership or a limited liability company, it is important to know that there are advantages and disadvantages to each.
By setting up as a company you can take advantage of the following:
- limited liability – if the business fails you are not personally liable for its debts (provided you do not act recklessly or fraudulently)
- customers or clients may perceive a company as more professional, established and more stable, which will encourage them to do business with you more readily
- corporation tax is lower than the tax paid by sole-traders and those in a partnership
- a company structure will allow you to obtain investment and/or business loans more easily
The disadvantages of setting up as a company include:
- more administration – ie you have to file annual accounts or face a fine
- more red-tape – you have to abide by the rules in the Companies Act 2006
- the financial details of your business must be made available to the public
How do I Set up as a Limited Company?
The first step is to register your business at the Companies House. This requires the filling in and signing of some basic forms. An accountant can do this for you.
Before you can register your company you will need to give it a unique name. Take your time thinking up a name for your business, make it memorable and reflect both your personality and the vision you have for your organisation.
You will also need to provide the Companies House with a Memorandum of Association and Articles of Association (the Articles). The Articles set out how the company will be governed, the rules that will apply to directors and the rights of any shareholders.
Your company will need to have an address which is registered with the Companies House.
Can a director be a shareholder?
Yes you can. All companies must have at least one director.
Who can file accounts with Companies House?
By law you have to file accounts at the Companies House annually. These will be made public. You will also need to inform the HMRC of the profits you have made and pay corporation tax on the amount you report.
Setting up a company is a fairly simple process. Once you have organised the formalities you will be free to get on with growing your business and celebrating your success.