To set up a limited company, you need to register with Companies House. You will also need the following information:
- A company name
- A registered office address
- At least one director
- Details of the proposed shareholding
- Principal activity of the company
Once you have this information, the process of incorporation is fairly straightforward and the company can usually be registered at Companies House within 24 hours of submitting the application.
The company will automatically be given a year-end accounting date based on the month it was incorporated. You can then change the company’s year end, if required, to a more preferred date.
Once the company is registered, Companies House will automatically notify HM Revenue & Customs (HMRC) and the company will be issued with a 10-digit Unique Taxpayer Reference. This is posted to your company’s registered office address, usually within a few days of the company being incorporated.
Although the process of incorporation in itself is simple, there are other things that should be considered in advance before the company can actively start trading.
Business bank account
Setting up a business bank account can often take weeks depending on the structure of the company as the bank will require certain identification documents from the directors and shareholders. This process can take even longer if there are individual overseas shareholders or the company is part of an overseas group.
It is often easier to work with a bank where the directors already have a personal bank account as this can speed up the process.
If the company is part of a group, the first point of call is usually the parent company’s bank as the ultimate controlling parties have already been through this identification process. Where the parent company is overseas, the bank will more often than not have a presence and contact in the UK.
Funding
Once the business bank account is set up, how will the business be funded? Will this be via personal loans or externally through the bank or other lender?
If externally, you will need to consider a business plan detailing your vision and strategy supported by financial projections.
Crowdfunding has also become a popular way of raising finance by using technology and social media to reach a larger audience.
VAT registration
You must register for VAT with HMRC if:
- The company’s annual taxable supplies exceed £85,000 (you can register voluntarily though if your turnover is below this level)
- The company’s taxable supplies are expected to exceed £85,000 in a single 30-day period
Once registered, you will receive a VAT number and a VAT registration certificate from HMRC, which will include your effective date of registration. This will also indicate when you need to submit your first VAT return.
The time taken to register for VAT depends on the complexity of the business, but generally takes at least one week if you are using an agent. This process can take longer if HMRC have further questions relating to the company and its supplies.
Business insurance
You need to ensure the company has the necessary business insurances in place. This is best dealt with by a commercial lawyer or insurance broker but is generally divided into three areas:
- Liabilities
- Properties
- Assets
The main insurances a company may consider are:
- Employers liability
- Public liability
- Product liability
- Professional indemnity
- Key man cover
- Property and buildings
- Business assets
PAYE registration
You must register as an employer and set up a PAYE scheme with HMRC if you start employing staff. You must register before the first pay date and the registration process can take up to two weeks.
It is an employer’s duty to protect the health, safety and welfare of its employees and the company has certain legal responsibilities to achieve this.
You may also want to consider how to pay yourself from the company.
Workplace pension
From October 2012 it was compulsory for employers to enrol workers in a workplace pension.
Employees must be enrolled in a workplace pension if they:
- Are not already in a qualifying workplace pension
- Are between age 22 and state pension age
- Earn more than £10,000 a year
- Work in the UK
Therefore, although the incorporation of a private limited company is usually a quick and simple process, there are other business issues to consider. The main areas summarised above can take a lot longer to implement and it is advisable to consider these in advance of any incorporation.
For further information on this topic contact Michael O’Brien here.