What to expect from setting up a limited company
Are you thinking of setting up a private limited company to run your business? If so, here is a summary of the steps involved.
1. Incorporating the company
All limited companies in the UK must register with Companies House – online, by post or through an agent such as a solicitor or accountant. This process is known as ‘incorporation’; a business doesn’t officially become a limited company until it has been incorporated. You will also have to nominate directors to run the company.
2. Notifying HMRC
You need to inform HM Revenue & Customs of the following:
- date you started up
- company name and registered number
- main business address
- business type
- accounting dates
HMRC will then send you a letter telling you how to provide the company information they need and how to set up an online account for your company tax returns and corporation tax (see below).
3. Preparing financial accounts
Once a year you’ll need to send statutory accounts to both HMRC and Companies House. This may require the help of a professional advisor as they must adhere to accepted accounting guidelines.
4. Keeping records
In order to be able to give a ‘true and fair’ view of your company’s financial affairs you need to keep a complete record of all business income and expenditure. Failure to keep the right records for the required length of time may make your company liable to a penalty.
5. Filing the tax return
Within 12 months after the end of every accounting period, even if the company didn’t make a profit, you must send a company tax return to HMRC – this is called filing a return. Late filing may incur a penalty.
6. Paying corporation tax
Corporation tax is only payable when the company makes a profit; the amount charged will depend on the amount of profit as well as when the profits were made. Rates vary according to the type of business.
7. Meeting your duties
Directors are required to sign the company’s financial accounts and tax returns to confirm their accuracy. Directors must also complete a Self Assessment income tax return annually, unless it is a non-profit making company.
We hope you found this overview about setting up a limited company helpful. Further details can be found at: www.hmrc.gov.uk/factsheet/limited-company.pdf