Forming a Company
How to incorporate a limited company, and what are your ongoing legal obligations as a limited company director?
If you want to set up a limited company for contracting, there are a number of steps you will have to follow to complete the incorporation process.
You can either form a company yourself (via Companies House), use a company formations intermediary to do this for you, or a contractor accountant can take care of the formations process for you when you join as a new client.
You can even manually submit Form IN01 and hte associated documents via the post, although this is rarely done these days.
The cost of setting up a company is not expensive, starting at a mere £12 if you go direct with Companies House.
Using a contractor accountant to form your company
There are benefits from using a specialist accountant to take care of the set up process on your behalf:
- Many accountants will charge a one-off fee to set you up as a limited company contractor. The reason why the fee tends to be higher than the £12 charged by Companies House is that you receive a great deal more in return.
- Depending on the service you sign up for, a specialist accountant will include a number of other services into the start-up fee, including setting your company up with a payroll, registering the company for VAT, and even opening a bank account on your behalf.
- Although you can set up a company yourself, before joining an accountancy firm, these additional start-up tasks will still need to be completed, and you may still be charged a fee as a result.
- Also, starting up as an IT contractor can be a daunting task anyway, so we’d always recommend using a firm of accountants to undertake the formation process on your behalf – not only will the administrative process be seamless, but a typical set-up fee is under £100, so it won’t break the bank.
What information is needed to form a company?
Although there are several ways of incorporating a new company, the information required by Companies House is the same.
You should have the following details to hand before you start the incorporation process:
- Your company name. This must be unique, and must not contain any ‘sensitive’ words or expressions – read this handy Government guidance to choosing a company name.
- Your company’s registered address – this must be a physical address where official paperwork can be sent. Many contractors simply use their home address, or their accountant may offer a registered address service.
- Each company must have at least one company director. You will need the full details of all the officials you wish to be associated with the company (date of birth, home address, etc.)
- Share capital – you need to provide a Statement of Capital which outlines how the company’s shares are to be split between shareholders. Many contractors either own 100% of the shares in one name, or split them 50:50 with a spouse or partner.
- A Memorandum of Association needs to be provided – this documents the intention of the company’s subscribers to become paid up shareholders upon incorporation.
- Every company must have Articles of Association which act essentially as the company’s rule book. If you use the Companies House online service, or a third party agent, you will typically use ‘model articles’, which will suffice for most business needs.
- You SIC code describes what type of business your company operates. Read this guide to SIC codes for more details – Section J may prove of particular interest. For many contractors, the correct code for “other computer related activities” is 62090. Ask your accountant if you’re unsure.
- Since April 2016, all companies must also provide details of People with Significant Control (PSC) – such as any shareholders who own 25% of the company’s shares or more.
This is a very high level guide to company formation. For detailed limited company guides, try ITContracting.com for more information.
If you want to set up a company online now, visit Companies House, with all the details mentioned above to hand.
A list of some of the UK's leading specialist contractor accountants.
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This is a great place to start when looking for an IT contractor accountant.