Step 1: Naming Your Company
Your business will need a name. Ideally this will be the same as that you trade under but does not have to be. Be careful not to trade under a protected name as this can cause issues.
Choosing the company structure is important, especially for those with multiple owners. The allocation of shares to a shareholder needs to reflect their value to the company. The person with the ownership over 50% effectively controls the company.
Setting the nominal value of a share is important. Most new limited companies will keep this simple at set the book value of 1 shares as £1 but it is possible to have a share worth £0.0001.
Companies mistakenly set up shares with very high nominal value thinking this is the value of the company but this can have ramifications, for example, if a company is unable to pay its debts the owners of the business are legally required to pay for any unpaid shares immediately.
Step 3: Company Taxes and Compliance
Once the company is incorporated you will receive a unique tax reference within a few weeks to the registered office you select. It is important to keep this number as this is required to submit the company tax return.
Ensure you have read up on Limited Company obligations.
Step 4: Limited Company Bank Account
You need a separate bank account for your Ltd Company from which to make and receive payments.
Once you have your company incorporation documents you will be able to have a limited company bank account put in place which will be an asset of your new company.
Approaching the branch you bank with personally can help you keep everything in one place but you should shop around for the best rates. Santander offers excellent business banking rates and Barclays offer brilliant support for small businesses.
As a shareholder of the company if you have not been in self-assessment, this the processing of announcing and calculating tax on income which has not been taxed at source, aka PAYE.
By registering for self-assessment you will receive a personal unique tax reference number. You have the responsibility to report to HMRC the income you extract from your Limited Company via salary and dividends.
Step 6: Bookkeeping and Administration
Once the company is formed, the bank is in place you are ready to start invoicing clients, remember you will need to quote the limited company registered number and registered office within the invoices.
Using accounting software such as XERO means that you can keep your invoicing, income and expenditure in one place. This means that you know how your company is performing, what’s outstanding and how much your spending whenever you need to know. Being organised in terms of admin is the key to success.
Step 7: Finding an Accountant
If you have managed to make your way through company formation and initial administration you may want to hire an accountant to manage your ongoing tax and accounting obligations.
Each year your profit will be subject to tax treatment. An accountant will ensure you are paying the correct rate of tax on the correct amount of profit whilst managing your costs as well as keeping you organised and supporting you as you grow.
We are small business accountants. If you would like to talk to us at Cottons Chartered Accountants about working with you then call us today, we have offices in Northampton, Rugby, Daventry and in London too.