The cost of setting up a limited company

Introduction

When you start your own UK company, you may be moving into this from:

  • Being in an employment type role.
  • Working for an umbrella company.
  • Working as a sole trader and you have now decided to incorporate your business.

One thing to consider as part of the company set-up process is what is the cost of setting up a limited company? There are in fact a number of ways that you can do this. What’s more, all of these have a different level of cost associated.

The choices that are available

Are you ready to go ahead and register a UK private limited company? If you are, we will now take a look at the different processes that you can undertake to do this, and their associated costs.

  • The first choice would be to do this yourself. You would apply directly with Companies House.
  • Your second choice is to appoint an accountant. You may prefer to appoint a contractor specialist to look after you. Once you appoint an accountant, you can then ask them to do this for you.
  • As a third choice, you could opt to use a company formation agent.

When we look at setting up a UK company, there is a £12 standard fee to pay when applying online with Companies House. On the other hand, you could choose to register by post on a paper form. The normal charge through the post is £40. Notably, with the speed that it takes to set up a new company online nowadays, most will register via the internet.

As part of setting up your own business, you ought to also give consideration to pre trading expenses. Our guide on business expenses also gives an overview of what you may be able to claim through your new business.

Please also have a read of our article covering tax tips for contractors.

In addition, we explain here the process of closing a UK company.

Incorporating your company

Form it yourself   

Please note, the process when you set up your new company up is not too tricky. Besides, you can do this online and follow the onscreen instructions.

When you pay the fee online, there are various options. You will have the choice of paying this  by debit card, credit card or even Paypal.

The cost of setting up a limited company -form it through your accountant     

When we look at how much to set up a limited company, please note, if you ask your accountant to do this, they may charge you a fee here. On the other hand, they may absorb the cost of this. This is normally the case if you sign up as a client and agree to pay them a monthly fee for their services going forward.

Once your company has been formed, you can then set up a company bank account. Another consideration will be if you need to register for VAT.

Form it through a formation agent     

Once again, when we look at how much to set up a limited company, if you ask a company formation agent to do this for you, there will be a charge. The fee can vary between each agent, as can the service that they provide. Some will provide some extras like setting up a business bank account and printed company papers. They may even do the VAT registration and give you a mail forwarding service.

Notably, most contractors prefer to let their accountant do this for them. Some contractors though will choose to do this themselves.

The cost of setting up a limited company -the process

As part of the process, you will need to fill in several sections. These are part of the form IN01 that is available online, once your company is incorporated. The details to fill in when you apply, are as follows:

  • The registered office address. This is the official address of the company. In addition, the registered address is where the company will receive any official mail.
  • Details for the company directors. These include the director’s name, service address, residential address, date of birth, nationality and occupation.
  • The company’s proposed share capital.
  • Type of business i.e., the company’s trading activity(s) (this is signified by the SIC code).
  • The shareholder details. These include their name and addresses.
  • PSC details (People with Significant Control). These include their name, service address, residential address, date of birth and how they control the company.

Normally, when a UK company is registered using the Companies House online service, it is set up with the `model’ Articles of Association. Please note, this is in effect the company’s rule book and this will govern its affairs. You can create your own Articles of Association should you so wish. However, this will involve the help of a solicitor.

During the registration process, Companies House will also inform HMRC and your new company. As part of this your new company will automatically be registered for Corporation Tax.

How long before your new company is set up?

The turnaround time, once the setup process is complete, is that the new company is usually registered within 24 hours. This can take a bit longer sometimes and it all depends on how busy Companies House are at the time.

As a result of setting up your private limited company, Companies House will email to you:

  • Your Certificate of Incorporation. This is effectively the birth certificate for your new company and you should keep this in a safe place. You will also be able to obtain a copy of this online from the Companies House public register, should you need to.
  • Memorandum of Association `Company having a share capital’. This page will need attaching to the model Articles of Association. You can also obtain a copy of the is from the Companies House register.

The Articles of Association is a legal document of written rules. These outline the rights and powers of the company shareholders and directors. As part of the company registration process, you can opt to use standard articles. These are known as model articles and these are the default set of articles established by the Companies Act 2006. As an alternative, you can write and then upload to Companies House your own articles. To enable you to do this, you may need the help of a legal adviser.

You can download the model Articles of Association from the link below:

https://www.gov.uk/guidance/model-articles-of-association-for-limited-companies#examples-of-model-articles

What are the other costs when you run a limited company?

Once you have paid for and submitted your new company registration, there will be an annual fee from Companies House in the future. This fee is in respect of the Confirmation Statement which is a form that needs submitting annually. The fee is £13 if you file online or £40 if you file via the post (most company owners file online). The Confirmation Statement form shows all of the official details for a company. These include the registered office, directors, PSCs and trading activity(s) etc.

Other than the annual £13 fee, any other costs will depend on your type of business. In general, this is likely to include accountants’ fees, insurance, wages, rent or use of home as office. It will also include any other outgoings that you will incur as part of generating income for and running your new company.

Final thoughts

We outline above what you need to consider, when you take a look at the cost of setting up a limited company.

The only other ongoing cost from Companies House, when you are running a limited company, is £13 per year. This fee will be due when the business files its annual Confirmation Statement.

As a final note, when a company closes down, there is a £10 fee that is payable to Companies House. You send this when you submit the form to apply for this.

Link to Contractor Advice UK group on

LinkedIn    https://www.linkedin.com/groups/4660081/

Published On: March 25th, 2021 / Categories: First timer guide, Starting Up Your Own Company /

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