How to set up a limited company
When you set up a limited company, you have two options; the easy way or the hard way! The easy way is to get your accountant or a company formations company to do it for you. The prices can range from around £30 to £150 and you won’t need to worry about a thing. At Contractor Unlimited we don’t charge our active clients at all.
The hard way is to do everything yourself. You need to send in a memorandum of association, a completed IN01 form and articles of association to Companies House. Whilst their staff are extremely helpful and can guide you, the process is rather time consuming and they are not too accommodating if you make a mistake.
Precautions to take before setting up a limited company
There are a few things to be aware of before you go ahead and set up a limited company. As a sole trader, since there is no difference between the legal or financial status of the individual and company, they can just take money out of their bank account whenever they want. When running a limited company however, there are three ways you are able to extract money from a company:
1) When paying a salary
2) When paying dividends
3) Repaying expenses
As a company director, you are legally obliged to submit accounts to Companies House each year. These can also be accessed by anyone.
If the legal obligations of the director are not met, they could be subject to some serious penalties. There are hefty monetary fines, possible disqualification of being a company director again and even imprisonment! Setting up a limited company is a big decision and is not one to be taken lightly, certainly not taken alone!