How to set up a limited liability company

For sole proprietors, this is an exciting time when you are hiring new employees or renting larger premises. You may find that your business is growing and you need to consider starting a limited liability company. While it’s not the right move for all businesses, starting a limited liability company may be the right move for you. However, this new undertaking does not come without responsibility and new processes. It can be difficult to figure out how to set up a limited liability company, what to do first, and where to register. To help guide you through this new process, let’s look at the initial steps you need to take to set up a new limited liability company.

Name your business

First, you will need to decide on the name of the company. This is the creative part and will cover the identity of your new company. Be sure to check on the HMRC website that your company name is not already in use. Remember that its official name must also contain the word “Ltd” or “Limited”.

Who will be the director and shareholders?

All limited liability companies must have at least one director of the company who is responsible for the company and who is entrusted with making company decisions and filing accounts. You must also nominate at least one shareholder; it can also be you, even if you are the director of the company.

Register at the Registration Chamber

You will need to complete an online registration form at Companies House, which usually costs £12. To do this, you need to have certain data at hand, such as the registered address of the company and information about the directors and shareholders. If you have not already done so, you will also be registered for income tax here.

Register for HMRC

Even if you are currently the only person working for your new limited company, you must register as an employer with HMRC. This will mean that you will be assigned a PAYE registration number, after which you will pay national insurance and income tax.

You will also receive a certificate of incorporation from Companies House to confirm the existence of your new limited company, which you will need to register your company with HMRC.

Make sure you have the right business insurance

While we advise looking for the best insurance policies to make sure your new limited liability company is fully insured against any contingency, you as a small business are only required by law to have employer’s liability insurance.

Set up another bank account

If you haven’t already done so, we recommend that you separate your personal and business finances when setting up a limited liability company. Open a corporate bank account, which must be in the name of your new company. Be sure to read the bank’s rules as different rules apply when opening a business account.

Register for VAT

You are required by law to register for VAT if your annual turnover is at least £85,000, so you may not need to register right away. However, in certain circumstances it may be preferable to register early as it can improve cash flow in the long run, and often a VAT registered company is considered more trustworthy and reliable for potential clients and customers.

This is an easy-to-read beginner’s guide if you’re about to set up a limited liability company for the first time, and while it can be the start of an exciting new venture or the product of business growth, it can also feel cumbersome and complicated. You can seek advice from an accountant who can help you with this transition. For more information about the company formation services we offer and how we can arrange the process for you, call us on 01491 578207.

Add a Comment

Your email address will not be published.