The cost of setting up a limited company

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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, you have decided to incorporate your business.

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

Setting up a limited company cost -the available choices

Are you ready to go ahead and register a UK private limited company? If you are, we will look at the different processes you can undertake to do this and the associated setting up a limited company cost.

  • 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 select a contractor specialist to look after you. Once you have an accountant, you can ask them to do this for you.
  • As a third choice, you could opt to use a company formation agent.

When we look at the cost of setting up a UK limited 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 standard charge through the post is £40. Notably, with the speed it takes to set up a new company online, most will register via the internet.

When setting up your own business, you should also consider pre-trading expenditure. 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 that the process when you set up your new company 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. 

Form it through your accountant

When we look at how much to set up a limited company, please note that 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 usually the case if you sign up as a client and agree to pay them a monthly fee for their services.

Once your company has been formed, you can 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 agents, as can the service they provide. Some will provide extras like setting up a business bank account and printing company papers. They may even do the VAT registration and give you a mail forwarding service.

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

The cost of setting up a limited company -the process 

You will need to fill in several sections as part of the process. 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) (the SIC code signifies this).
  • 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.

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

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

How long will it be before your new company is set up?

Once the setup process is complete, the turnaround time is that the new company is usually registered within 24 hours. This can take a bit longer sometimes, depending on how busy Companies House are at the time.

As a result of setting up your private limited company, Companies House will email 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 to be attached to the model Articles of Association. You can also obtain a copy 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, the default set of articles established by the Companies Act 2006. Alternatively, you can write and then upload your articles to Companies House. 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 typical 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, a form that needs to be submitted annually. The fee is £13 if you file online or £40 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, trading activity(s), etc.

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

Final thoughts

We outline above what you need to bear in mind when considering the cost of setting up a limited company.

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

Finally, a £10 fee is payable to Companies House when a company closes down. 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: August 1st, 2022 / Categories: First timer guide, Starting Up Your Own Company /

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