Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    linziw
    Becoming a Limited Company
    • #1
    • 29th Oct 05, 1:07 PM
    Becoming a Limited Company 29th Oct 05 at 1:07 PM
    Hi!

    Ive recently been offered a job, where I have to make myself a limited company before I can start there. As I have only just graduated this is a bit of a worrying responsibilty as I have no idea what is involved. Would anyone be able to outline the advantages/disadvantages in doing this please and what the tax/national insurance implications would be?

    Also is it possible to become a limited company completely under my own name?

    Many Thanks!
Page 1
  • WHA
    • #2
    • 29th Oct 05, 7:29 PM
    • #2
    • 29th Oct 05, 7:29 PM
    To cut a VERY long reply to a few bullet points:-

    Advantage - You MAY save tax because you can use the company for flexibility as to when to pay yourself anything, choose between salary (tax and National Insurance (NIC)) or dividends (no NIC - saving over 20%!). However you may be caught by Inland Revenue rule IR35 which effectively means you have to pay yourself almost entirely in wages, so the tax and NIC would be very similar to being an employee - therefore you lose the tax and NIC savings!

    Advantage - Your hourly/daily rate will be higher than as an employee since the employer doesn't have the same "employer rights costs" see below.

    Disadvantage - You don't have any "employee rights", so the "employer" don't pay you holiday pay, sick pay, mat(pat)ernity pay, notice, redundancy, benefits etc. You don't work, you don't get paid by the employer - simple!

    Disadvantage - you will have to register your company as an employer and employ yourself and may have to register for Value Added Tax (VAT)

    Disadvantage - Costs - you have to pay for the limited company to be set up, pay bank charges for a business bank account, pay for employers liability insurance and probably professional indemnity insurance, have a lot of paperwork to do (accounts and returns etc), probably need an accountant.

    There are lots more advantages and disadvantages, but the above are the main ones. I would strongly suggest that you contact an accountant without delay (there are lots that specialise in "one man companies" - try to avoid the High Street firms who'll see you as too small to bother with, and certainly before accepting the appointment - there are alternatives such as "umbrella companies" which act as agents between you and the "employer" meaning you don't need your own company.

    As for company name, within reason, you can choose anything that already hasn't been taken - have a look at www.companieshouse.gov.uk and do a "search" of your chosen names to see what is available.

    Please, don't "go it alone" without an accountant or similar unless you are confident that you can do it properly yourself - these things cost a lot more money to put right if they're in a mess.
  • 1purplefairy
    • #3
    • 29th Oct 05, 10:25 PM
    • #3
    • 29th Oct 05, 10:25 PM
    Hi

    My OH also recently (5 months ago) got a job and had to register his own Limited Company.
    No disrespect to the advice given by 'WHA' above -It is obvious he knows what he's talking about- but I would advice you to rather than set the Company up by yourself, get a Limited Company Provider that specialize in setting up Limited Companies for individuals to do it for you...

    It saves you all the hassle of setting it up and registering it yourself and they do all the hard work for you, such as producing the legal & financial documents etc. and whatever else the company needs to comply with legally.
    Comes in handy as we are not all accountants or legal experts!!

    Basically all that you do in exchange for this is pay them a set monthly fee.
    We pay 54 a month or 16 a week, depending if you get a salary(monthly) or wages (weekly), whichever you prefer.
    Although we havn't shopped around to compare prices, so you might get it for loads cheaper, not sure what the average going rate is.

    Also I suggest you search around, google it.
    We use "Parasol IT", although this company was suggested by my OH's employment agency as he works in the IT Industry.

    You could also try "1stcontact" --->

    http://www.1stcontact.co.uk/live/ind...Category_ID=22

    My friend got it done through them, and he has never had any problems in 3 years, so I would recommend them! above is the link that takes you directly to their Limited Companies Page. Quite a reputable Agency, as they specialize in things like that and have been around for some time now. (They also give you a free consultation)

    Hope this helps
    Last edited by 1purplefairy; 29-10-2005 at 11:51 PM.
    do you believe in Fairies?

    It is that what you do, good or bad,
    will come back to you three times as strong!
  • Sofa_Sogood
    • #4
    • 29th Oct 05, 10:37 PM
    • #4
    • 29th Oct 05, 10:37 PM
    Hi!

    Ive recently been offered a job, where I have to make myself a limited company before I can start there. As I have only just graduated this is a bit of a worrying responsibilty as I have no idea what is involved. Would anyone be able to outline the advantages/disadvantages in doing this please and what the tax/national insurance implications would be?

    Also is it possible to become a limited company completely under my own name?

    Many Thanks!
    by linziw
    First and foremost I'd get a good, but cheap accountant. The emphasis is on the 'good' by the way. But that's just my opinion.

    I'm still learning about Ltd Co's, but without a good accountant, (and posts like the above), I'd never learn a thing .... but I do - daily
  • linziw
    • #5
    • 30th Oct 05, 2:08 PM
    • #5
    • 30th Oct 05, 2:08 PM
    Thanks for everyones advice! I shall look into these companies that look after your company for you, as i shall be doing freelance work so it could get pretty complicated to sort it all out myself!

    Thanks
    Linziw
  • DGX
    • #6
    • 30th Oct 05, 9:58 PM
    • #6
    • 30th Oct 05, 9:58 PM
    I have just started a temporary 6 month contract and following advice from practically every other contractor that I met, I have registered a limited company

    Before you do anything, seek out a good cheap accountant
    I found mine through recommendation from a fellow "contractor"
    As it happens, he also seems to look after half the taxi drivers in town, my local pub, the chippy etc etc


    When you've found your accountant, TAKE HIS ADVICE



    I didnt bother with an umbrella company
    It cost 85 to set up the company plus 15 for my accountant to do it for me
    I know that the 15 quid expenditure wasnt "money saving", but he knew what he was doing and I didnt

    The advantages so far:

    At the moment, there's free business banking for the first 18 months at Lloyds TSB
    As my business is in contracting for different companies for set periods, after the 18 months is up there will be theoretically nothing to stop me looking for another business bank account



    The disadvantages
    No sick pay
    No holiday pay
    A 1-week notice period if the employing company no longer wants me (but that can work both ways) Bearing in mind I got made redundant with 1 month's notice, that isnt really as big a deal as you might think

    You MAY have an issue with getting mortgages or loans approved, as they are usually agreed subject to regular income, and you won


    Also worth mentioning:

    Paperwork is minimal for me
    All I have to do is keep a record of my mileage and records of money going in and money going out and where I spend it - as a moneysaver, that's nothing new!!!
  • Robert_Sterling
    • #7
    • 30th Oct 05, 10:50 PM
    • #7
    • 30th Oct 05, 10:50 PM
    Hi!

    Ive recently been offered a job, where I have to make myself a limited company before I can start there. Many Thanks!
    by linziw
    I do not think you have to make yourself into a Limited Company.
    I think you continue to be yourself.
    You may cause a Limited Company to be formed.
    ...............................I have put my clock back....... Kcolc ym
  • NAR
    • #8
    • 30th Oct 05, 11:29 PM
    • #8
    • 30th Oct 05, 11:29 PM
    I do not think you have to make yourself into a Limited Company.
    I think you continue to be yourself.
    You may cause a Limited Company to be formed.
    by Robert_Sterling
    Why are you contributing to something you don't know about?
    You were a molly coddled (financially) teacher for goodness sake!
    OP has asked and has been given useful advice, but as usual you tend to interfere without the proper knowledge. :nono:
  • Pennywise
    • #9
    • 31st Oct 05, 9:26 AM
    • #9
    • 31st Oct 05, 9:26 AM
    Why are you contributing to something you don't know about?
    You were a molly coddled (financially) teacher for goodness sake!
    OP has asked and has been given useful advice, but as usual you tend to interfere without the proper knowledge. :nono:
    by NAR
    I think it is you who doesn't know what you are talking about. He is quite correct in saying that "you don't turn yourself into a limited company" - you continue to be yourself and you arrange for a limited company to be formed which in turn would employ the person - it is the creation of a completely new, independent legal entity. The op specifically said "make myself into a limited company" so I think the answer is perfectly sensible to avoid confusion.
  • slipp_digby
    the OP eludes to the job being dependant upon ltd copmayn formation, and it would be helpful to clarify why.

    is the job working for your own 'ltd company' providing services for another single company or entity only e.g oursourcing of human resources/IT to you as a contractor?

    if so, you need to ask them directly if there are any potential IR35 issues of their proposed arrangment as HMRC have been cracking down on 'hidden employees' and umbrella compaines.

    if you are IR35 it may reduce the benefits as described by others above for a straight limited company. it will also effect the record keeping and tax efficiency.

    this explains a bit more about IR35 http://www.ir35calc.co.uk/legal_advice_ir35.aspx

    it may also be a scam

    so do your research into them - ask for (and follow up) references of others who have formed a company to work for them. if they are a decent setr up they wont have any issues with you doing this.

    to answer your other question the ltd company is a legal entity of which you will be a shareholder (thus able to draw profit), director/secretary (on a salary).

    you could call it "linzi w consulting ltd" or anything else which companies house will allow. you dont have to though, its entirely your choice.
    Last edited by slipp_digby; 08-05-2009 at 12:21 PM.
  • slipp_digby
    I have just started a temporary 6 month contract and following advice from practically every other contractor that I met, I have registered a limited company

    I didnt bother with an umbrella company
    Originally posted by DGX
    does this not put you under IR35?
    Last edited by slipp_digby; 08-05-2009 at 12:16 PM.
Welcome to our new Forum!

Our aim's to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

4,140Posts Today

6,884Users online

Martin's Twitter