How do I set up a Limited Company?

Assuming you’ve decided to set up a new company, how do you go about it?  If you’re still making up your mind, please check out this article or get in touch.

Setting up your own company is surprisingly easy to do. In fact, I don't offer this as a standalone service as it makes far more sense for people to do it themselves.

However, this is not the case for those of you who wish to create Community Interest Companies (CIC’s) or have bespoke constitutions - I'm afraid you’ll have more work to do.

Strictly speaking, you only need to do number 3 of the steps below to create a new company.  However, I’ve included other areas that you should perhaps consider if you want to get off on the right foot:

1) Your Company's Name

This is the trickiest part, especially if you wish to future-proof. This video might help get you started.

There are certain restrictions as to what you can call your company. One of the main hurdles is selecting a name that hasn’t been used. Here’s a tool to check for available names

Often people set up companies just to protect a name they might wish to use in the future. These are known as Dormant Companies.

In some cases, companies use a “trading as” which might suit their service better than the legal name they register with Companies House.

2) Do You Need a Domain Name?

At this point, you might also want to see if the domain name is available. This can ensure that the web address, email addresses, and company name are all aligned.

If you do, try and register the company and the domain name at the same time. It’s not unheard of for a related domain name to be suddenly purchased when a company is registered!

3) Registering Your Company with Companies House

This is surprisingly quick to do online from the Companies House website. Here’s the link

You’ll need your company’s:

  • Name

  • Address

  • Business activity – you’ll need to pick up to 4 Standard Industrial Classification (SIC) codes. Here’s a list.

You’ll also need to know:

  • The Directors (at least one)

  • The Shareholders (at least one)

  • Details of the shares and shareholdings

  • Who the Persons of Significant Control (PSC) are. Normally those with more than 25% of the shareholding

This might seem like a lot when written down but is quite quick to do.

Please bear in mind that this is only for a standard company limited by shares. Get in touch if you are unclear if this is what you require.

4) Setting Up a Business Bank Account

As a company is considered a separate legal entity to the owners, it needs to have its own bank account. This might take a while to set up so worth doing before you wish to start taking payments. Here’s an article with some thoughts on what bank account to choose.

If you are setting up a dormant company, I’d advise you miss this step for now. Receiving bank interest is considered a significant transaction and would mean you’d have to compile annual accounts rather than the much-simplified dormant accounts.

5) What About Your Brand?

Once you’ve created your business you’ll want to share it with the world. Branding is a key part of your business’ identity. It should be at the core of what you do, so definitely something to consider at the very outset. Here's a good place to start exploring this vast topic.

6) What Insurance Do You Need?

A key consideration before you start doing anything is insurance.

Here’s a handy guide to give you an idea of what you need to consider.

7) Registering with HMRC

Once you start trading you’ll have to let HMRC know within 3 months. Here the link

Before you do this, you'll need your UTR (unique tax number). This should be posted to your registered address within 10 working days of registering your company with Companies House.

There are 3 main types of tax you're likely to have to deal with and you’ll need to register separately for each one:

  • PAYE
  • Corporation Tax
  • VAT

8) Taking Control of your Accounts

You’ll need some way of raising invoices and recording your expenditure. Apart from compliance reasons, this can really help you stay in control of your business. At the very least -  just remember to keep hold of all your receipts and mileages.

Certainly, this is something that’s best to consider from the start. Book a call if you'd like to discuss this more.

Good luck with your new venture!

 

What are Trade Debtors?

If Income is the life and soul of the party, Trade Debtors are the damp squib

  • Income shows what has been invoiced.
  • Trade Debtors shows which of these invoices haven't been paid. Essentially, who still owes you money!

It explains the difference between what you have earned on paper and what you have received in the bank.

Clearly, receiving the cash is the most important part of the process so it's important to be on top of which invoices are unpaid.

Often both Income and Trade Debtors are used to calculate "Debtor Days", the number of days it takes on average for an invoice to get paid.  However, I believe it is important to look at the Trade Debtors on a customer by customer basis rather than as a solitary figure.  

For me, reviewing who owes you money should be a key business activity, an important part of the customer relationship.  There can be many reasons why invoices are unpaid: from invoices going missing or not being sent; to the customer not being able/willing to pay.

How you decide to deal with them will depend upon the customer relationship. However, by spotting problems early you have more options available and can ensure you don't (in extreme cases) spend time and resources on a customer who is unlikely to pay.  In short, it can help to stop you being a "busy fool".

Why Is a Simple Job So Expensive?

Upon giving someone a quote, I received the following response:

"Isn't that expensive? Don't you just have to stick in a few numbers?"

It was a relatively simple job, but I couldn't see how it could be offered at a lower rate.  In fact it turns out I was in line with what others were/are quoting.  It's true, if the task was a simple as sticking in a few numbers, a quote of more than a few quid would seem excessive.

This makes it an interesting question. Let's explore why even a simple job does come at a price:

What Numbers and Where?

Much of accountancy could be perceived to be "sticking in a few numbers". The key is knowing what the numbers should be, where to put them and what they mean.

It's not just the numbers - in some cases just knowing to put a tick in the right box can save a company thousands.  Bringing this expertise to the party is where true value can be added rather than mindlessly typing in numbers.

Setting Things Up

If an accountant agrees to act for you, there are various steps they need to take to get everything set up.  Apart from their own internal systems and processes they have to comply with various legislation, such as running anti-money laundering checks, and getting authorised as your agent with HMRC.

This all takes time and effort.

When Problems Arise

Unfortunately problems can arise that are out of our control. Sometimes sins of the past, perhaps ones you didn't know about, can pop out of the woodwork.

Rather than shrugging their shoulders, many accountants take responsibility for these issues. They will help to resolve them and check that there is nothing else that could present an issue in the future.

While this gives you peace of mind, it passes on the risk to your accountant. Your accountant's grey hairs come at a price.

Keeping up the Standard

When running a business we all have standards and should stick to them.

Sometimes this is to comply with regulating bodies, sometimes it's just because we want to offer a quality service.  This makes it impossible to do a "five minute job" in five minutes.

If you have a simple job that needs doing and are confident taking care of things yourself, this might be a good option.  After all, you will not have to go through all the steps an accountant would have to deal with.  However, if you are unsure or don't think you'll get round to it in time - perhaps consider getting some help.