Running your own company is hugely rewarding, seeing it grow from strength to strength gives an enormous sense of pride. For many though the thought of setting up a limited company is daunting.
We have scoured the Internet to find you the best advice from company directors, on what to take into consideration when forming a limited company.
1. Find a good accountant
Our research has shown that the top piece of advice we came across again and again is “find a good accountant and use their services”.
Yes an accountant costs money but in the long run it will save you money. We recommend engaging with an accountant at the outset, they will guide through the formation process and depending on the service they offer even fill in all the necessary forms associated with forming a limited.
If you are unsure which accountant to use, the best starting point is asking for personal recommendations. Alternatively, do some research online and look for advice in forums. The Contractor UK Forum has a list of recommended accountants.
2. Set aside an amount each month for Corporation Tax and VAT
A limited company is required to pay Corporation Tax and VAT. Corporation Tax is due 9 months and 1 day after the company’s year end. If you are VAT registered then this is due quarterly.
You may be thinking ‘I have ages until I need to pay it and I don’t need to worry about it yet’. Don’t! If you are not prepared you may find yourself in a situation where you don’t have the funds to pay for it. HMRC does not look at this favourably.
Our advice is to set aside an amount each month that will be used to cover these liabilities. This way you won’t have a large amount to find later on.
3. You and the company are not the same
The major benefit of a limited company is that it provides limited liability to its owner. When you form a limited company it is best to see it as a separate entity and any money held within the business bank account belongs to the company and not you.
Even as the company director the money is not yours to spend freely. Access is through the payment of dividends that are to the company shareholders (this includes yourself).
It’s important to remember that you are legally responsible for the company’s finances. Your accountant is there to offer guidance and advice but at the end of the day it is up to you to make sure that everything is carried out correctly. Our advice is if you are unsure about something speak to your accountant first.
4. Be organised
As a limited company you are legally obliged to keep proper records for at least 3 years, or 6 years if you are VAT registered.
Make your life easier and take the time to organise everything. This means having a filing system that works for you (not piling everything up in the corner of the room). Keep all company related paperwork together in a folder and all expenses together in month order along with relevant receipts.
You will save time and avoid stress by following these simple tips. You can then focus your time and energy on running and growing a successful company.