Many new business owners choose to set up a limited company rather than as a sole trader or a partnership. There are several advantages to being a limited company, including being able to keep your personal finances separate from business finances. Our virtual assistance outsourcing team supports many limited companies during their early years to make them as successful as possible. Here’s our guide to setting up a limited company.
What is a limited company?
There are two types of limited companies: those limited by shares and those limited by guarantee. Companies limited by shares are described on the government’s website as being profit-making companies, whereas companies limited by guarantee are usually not-for-profit businesses.
So, for most businesses, a company limited by shares is the usual option. This gives you the following benefits:
- Your business is legally separate from you and any other people running it.
- Your business will have completely separate finances from your personal finances.
- Your business will be divided into equal shares with shareholders holding shares in agreed proportions.
- Your business can keep any profits made once tax has been paid.
The benefits of setting up a limited company
There are several administrative and financial benefits of having a limited company, particularly if you have growth plans and a strong business proposition. These benefits include:
- Corporation tax on your profits is set at a lower rate than the higher rate of income tax you would pay as a sole trader.
- If you plan to employ staff – even if you are also using virtual assistant sites – you can pay your salaries via the Pay as You Earn scheme, which makes administration easier.
- Any liabilities are the company’s, not yours. That means that even if your business is in trouble, you are usually protected from being personally liable.
- You can sell shares, increase the number of shares and sell the business much more easily.
- It may be easier for you to get onto supplier lists or bid for work as a limited company.
How do you set up a limited company?
It’s pretty easy to set up a limited company and there’s lots of help and guidance available on the government website. Here are the basic steps:
Choose a name for your business – you need to check the rules for company names, which include things like not including expletives. Then you need to make sure that no other UK registered company already uses that name. You should also check the trademark database so that you know you are not infringing on any registered mark.
Nominate directors– you need at least one company director, who must be over 16 and not have been previously disqualified from being a director. You may also want to appoint a company secretary, although this isn’t a requirement for setting up your company.
Decide on your shareholders – you will need one or more shareholders. Often, directors of limited companies use share dividends instead of paying a salary, so check with your accountant or tax adviser on the best way to manage this for you.
Draw up your Memorandum and Articles of Association – these determine the way your business will work and are a requirement for a limited company. You should also make yourself aware of the records you need to keep and the responsibilities you have for filing regular information.
There is plenty of help and advice available, both online and through any legal advisers you may be using. The important thing is to make sure you have everything in place and have completed all the necessary checks before you start the registration process. This will help to make the process more efficient, so you can get on with your new business.
What to do next
Once your limited company is registered, you’re ready to start working! And that’s the point where you’ll need some support to help you get off to the best start. Working with managed virtual assistants can help you to offload some of the everyday administrative tasks so that you can focus on networking, customer meetings and developing your plans. In fact, the best virtual assistant services can take a whole range of tasks off your hands – from managing your social media to keeping on top of your bookkeeping – giving you an affordable way to get started before you have to think about hiring staff.
If you’re thinking about starting a limited company, this virtual assistance outsourcing guide gives you the basics. You can find out more at gov.uk, so that you can get on with starting your business sooner rather than later. If you’re also interested in support from a virtual assistant for small business start-ups, feel free to call us on 0800 994 9016 or use our contact form in the menu above.
- The virtual outsourcing guide to setting up as a freelancer or sole trader
- What is a limited partnership, and how can a business virtual assistant help?
- Starting your own small business – the first four months