Starting your own business is exciting and there are many things to think about. If you are planning to trade as a limited company here are a few pointers before you get going
Are you sure limited company is what you need?
You can set up your business as self-employed, in partnership or as a limited company. The tax administration of trading as self-employed is much more straight forward than trading as a limited company. All you need to do is keep a record of your purchases, sales and stock and register as self-employed with HM Revenue & Customs. Running a company is more complicated and there are legal requirements that a company must meet that do not apply to the self-employed.
If you download our FREE ebook – Starting a Business: Accounting Essentials – there is more information to help you make this decision.
You have decided a limited company is for you…
You will need to set the company up but before you do have a think about the three groups of people who will be involved in the business:
- Shareholders – the owners of the shares and therefore the owners of the business;
- Directors – the managers of the business; and
- Employees -the workers.
It could be that you will be the owner, director and employee of the business but you may want to think further?
Do you have a family? Could they be involved in the new business so that the shares are split between you all?
What if you want to set up a husband and wife business but, say, the husband will do most (but not all) of the work? You could decide to split the shares between the two of you in whatever ratio you like, maybe 60:40? (Shareholders). Then both of you could be directors (managers) but maybe only one of you would be an employee and take a salary from the company (employee)?
The three categories of people do not have to be the same, they can be but do not have to be.
For instance, with a family business it may be easier to set up different classes of shares, so maybe Mum and Dad own A shares and the children own B shares (shareholders). Mum and Dad are registered as directors and run the business (managers) and both take a salary (employees). As and when the children become of age and start to contribute to the business (perhaps as employees) they could become more active and use their votes and receive dividends?
Share changes can be made at any time during the company’s life but it is easier to think about it at the beginning and get it right first time.
Forming the company
Once you have thought about the ownership, directors and workers then you can go online at Companies House and set the company up. You will need to go through all the screens (or ask an adviser or company formation consultancy to do this for you) and pay the incorporation fee.
If everything is correct your company will be set up within a couple of days. Now you can go to the bank and open a bank account – then you are in a position to start trading.
If you need help going through this process then please contact us here at Clearways Accountants for some help and advice in setting up your new company.