Guide to Setting Up a Limited Company

It's not essential when operating as a contractor but a huge number of contractors do choose to work through their own limited company. Not only does doing so offer a range of tax advantages, but it can also help to make a contractor appear more professional.

However, the process of setting up a limited company can be a daunting task for a contractor with no previous experience in business matters such as this. So what are the steps they must take to complete this process?

The Basics

First and foremost, to set up a limited company, a contractor must register with Companies House, which is the United Kingdom’s registrar of companies and is an executive agency and trading fund of Her Majesty’s Government.

In order to register with Companies House, and thus make a private company official, there are various criteria that must be met.

The first of these is the need for a name for the contractor's private company. This name cannot be the same as, or too similar to, the name of another company. Nor can the company name be offensive, suggest a connection with the government or local authorities, or contain a sensitive word unless permission has been granted.

Once the company name has been decided and approved, a contractor must then choose the address that the limited company will be registered to. This can either be the contractor’s home or a formal business address.

The People

The next step in setting up a limited company is to choose at least one director and at least one shareholder. The director – most likely the contractor setting up the company – will be the person who is legally responsible for the company. The director’s name and address will appear publicly on Companies House.

As long as they are over the age of 16 and have not been disqualified from being a company director, any contractor can register as the director of their own limited company.

A limited company with shares must also have shareholders – at least one – who might need to be consulted if there are to be changes made to the company. As part of the company formation process, a contractor must provide a ‘memorandum of association’, which is an agreement between the shareholders – otherwise known as ‘subscribers’ – and the director to set up the company.

Final Steps

With these details all confirmed, the process of setting up a limited company is almost complete.

One final formality that a contractor must satisfy with Companies House is the ‘articles of association’. This is essentially a written document that outlines the rules the company will be run by – if the company is limited by shares, the articles of association must be agreed by the director and shareholders.

Standard articles are available, so a contractor does not need to create their own from scratch, although they can do so if they wish.

Easy Limited Company Set Up

If all of the above seems rather time consuming, and you would like assistance with setting up your Limited Company, we will put you in touch with a specialist contractor accountant who will swiftly deal with it all for you and answer any questions you may have. It also ensures your company is set up correctly from the outset. Please contact us on 01728 726515 for more information.