limted guide for llc

LimitedCompany

Not just your everyday accountant

Brookson. Here with allthe right options.

A simple, no-nonsense guide to setting up and running

a Limited Company.

Guide Contents.

Not just your everyday accountantNot just your everyday accountant Limited Company

Setting up a Limited Company 2

The Main Benefits 3

Appreciating the Financial Benefits 4

Defining a Limited Company 6

The Formation Process 7

Responsibilities and Duties as a Director 9

Employment Status and Complying with IR35 11

Starting to Trade 13

About Brookson 16

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1 Setting up a Limited CompanyAlthough running a Limited Company maybe the most tax efficient way of working, it is considered the most complex, due to the higher degree of responsibility.

In forming a new Limited Company you are creating something that’s yours to grow, nurture and develop. It’s exciting, can bring a sense of achievement and has the potential for great financial return amongst other rewards. There are however a number of things to consider, such as the legalities of registering a new business, regulatory and tax compliance, ongoing administrative requirements and the day-to-day process of actually running the business and making a profit.

With all of this in mind, this guide has been produced to help you understand what is involved in forming your own Limited Company. It outlines some of the issues, benefits, and processes associated with setting up a Limited Company, explaining what you need to do to get up and running and what to expect as a director of a company.

Brookson’s specialist advisors are always on hand to offer further advice and guidance should you have any questions, simply request a call back or call us on:

0800 230 0213If you’re not sure a Limited Company is what you need please look at our Choices Guide that outlines all available options

If you’re already sure you would like to setup a Limited Company with Brookson please go to www.brookson.co.uk/join-limited

Alternatively you can call us on:

0800 230 0213

“Brookson is a great company, but it’s the people working there that makes the difference. I wish now I’d joined earlier!”Dimitrios Papadopoulos, Kent

‘‘

Brookson. Here with all the right options. Limited Company

http://www.brookson.co.uk/knowledge-centre/guides/free-guide-to-working-options/

http://www.brookson.co.uk/join-limited/

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2 The Main Benefits


While running a Limited Company does have its fair share of responsibility and the administration is certainly greater than other ways of working for yourself, there are many benefits;

n Lower personal risk You have a greater level of protection should things go wrong. Assuming all rules

have been followed, as a director you will not be personally liable for any financial losses made by the company.

n Separate entity A Limited Company is a legal entity in its own right. Everything from the company

bank account to the ownership of assets relates to the company, they are totally separate from the interests of the directors and shareholders.

n Higher take-home pay As a director and shareholder of a Limited Company you can efficiently manage

your own tax position. For example, if you decide to take the majority of your income in the form of dividends you can potentially reduce your tax liability and save on National Insurance costs.

n Credibility You are able to create a business brand and when working with larger companies a

Limited Company can present a more professional image. In some industries it may even be a mandatory requirement, as certain companies will not deal with sole traders or partnerships.

n Protection As well as the lower personal risk mentioned above, once you have successfully

registered your company, law protects the business name. Companies House has very stringent rules for the naming of companies, no one else can use the same name, or anything deemed too similar.

n Ownership and succession As the sole shareholder in your company it belongs to you. A Limited Company however,

can easily transfer ownership of shares, or existing shareholders can sell a stake in the company to other parties at any time. In instances where a shareholder wishes to retire, or a new director is brought on board, it is far easier to transfer ownership, or part ownership, of a Limited Company than with a less formal business structure.

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The financial implications of running a Limited Company are one of the key benefits. By utilising dividend payments and other tax incentives in line with HMRC guidelines you can efficiently optimise your income.

With Brookson you can typically expect to take home around 81%-86% of your contract value. With the added support and guidance of our specialist tax advisors to further maximise your income you’ll keep more of your hard earned money.

The following breakdown illustrates across a range of incomes, the impact of running a Limited Company and working with Brookson has compared to the alternative ways of working.

Take home pay calculations:

AssumptionsThe calculations are based on 40 hours per week over 52 weeks claiming £2,600 expenses and 10,400 business miles per annum. HMRC Flat Rate VAT Scheme at 13.5%, directors fee of £192 per week. Limited, Sole Trader and Umbrella figures include the Brookson fee or margin. Agency/PAYE includes a rate reduction of 13.8% to accommodate employers NI. Flat rate VAT for Limited is 13.5% providing annual income does not exceed £230,000.

3 Appreciating the Financial Benefits

Hourly/Annual Agency/PAYE(annual take home)

Umbrella(annual take home)

Sole Trader(annual take home)

Limited(annual take home)

£10 / £20,800 £15,147 £16,894 £19,630 £19,043

£15 / £31,200 £21,243 £24,454 £27,295 £27,679

£20 / £41,600 £27,339 £30,668 £34,959 £36,315

£25 / £52,000 £33,140 £36,883 £42,066 £44,951

£30 / £62,400 £38,339 £42,451 £48,327 £53,587

£40 / £83,200 £48,738 £53,052 £60,849 £70,860

£50 / £104,000 £59,138 £63,653 £73,351 £88,132

£60 / £124,800 £68,018 £73,630 £81,901 £105,404

£80 / £166,400 £86,341 £91,463 £102,145 £135,131

Finding an accountancy partner to help youRemember, you don’t need to do everything by yourself. The option that you choose should allow you to be free to grow and develop in line with your plans.

Your finances are key to optimising the greater reward achieved by working for yourself. An accountancy partner you can trust, such as Brookson, will give you the freedom to focus on your work with the peace of mind that your administration is being taken care of and is compliant, accurate, up-to-date and in order, as well as optomising your income.

Your financial needs do not end with your accounts. In addition to our exceptional accountancy services, we have partnered with specialist financial services company Brookson Financial Services (BFS) to provide a full range of financial products especially for freelancers, contractors and self-employed professionals.

If you are ready to set up a Limited Company and would like to work with Brookson please go to: www.brookson.co.uk/join-limited


0800 230 0213


For a Best Advice Consultation, just call 0800 230 0213

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4 Defining a Limited CompanyThere are two types of Limited Company:

1) Public Limited Companies that are publicly traded on the stock market, referred to as PLCs.

2) Private Limited Companies that are privately owned businesses, referred to as a Limited (LTD) Company.

The information in this guide will focus on the process of setting up a Private Limited Company.

There are some specific requirements that apply to a Limited Company:

n A Limited Company must be registered at Companies House. This is where all UK companies are registered. Its main purpose is to maintain the records of registered companies and to make this information available to the public.

n A Limited Company is owned by its shareholders and run by its directors. If you are opening your own Limited Company, you are both a director and shareholder, as well as its employee.

n A Limited Company is governed by its own articles of association. These are the internal rules by which the company will be managed. Every company must have articles by law and all members of the company must adhere to these rules.

n A Limited Company is a legal entity in its own right. In other words, it has its own legal rights and obligations. That means any profits and losses belong to the company; so the business itself can continue regardless of the death, resignation or bankruptcy of any shareholders or directors.

n A Limited Company offers limited liability. The company (as its own legal entity) is liable for its debts. The shareholders and directors are not personally liable. Their liability is limited to paying to the company what they have agreed to pay for their shares.

Once you register your Limited Company at Companies House, you take on a degree of responsibility. There are people to help however, so you should be careful to choose an accountancy partner who can help through each of the stages, from setting up your business to helping with the ongoing administration.


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5 The Formation ProcessIn setting up, owning and running a Limited Company, you will be responsible for each step of the process and for ensuring these are all managed and completed correctly. There are certain rules to follow and specific forms need to be completed and registered with strict penalties should these be missed.

Finding a nameOne of the first things you need to do is choose a name for your company. This requires some thought for a number of reasons. Not only is it the first thing potential clients will see, you have to keep it for the life of your venture. You must also ensure that your chosen name meets all the statutory requirements, rules and restrictions imposed by company law.

There are other considerations too:

n A private company name must end with ‘Limited’ (or Ltd).

n It must not contain certain words or expressions (listed by Companies House).

n It must not imply a connection with central or local government.

nIt must not be offensive.

While you are thinking about your company name, you should look to research domain names at the same time. While your website address is totally separate and not included as part of the company registration process, you could save yourself a lot of time, stress and money further down the line by researching both together.

IncorporationIncorporating your company is a relatively simple process. You can do it yourself, Brookson can do this over the telephone via our preferred business partner, or you can employ the services of a company formation agent. Whichever way, the objectives are the same, to register your new company and all the details at Companies House. Incorporating lends credibility to the business. It also means you have to appoint a director who is ultimately responsible for running the business

All of the relevant information must be submitted to Companies House. This includes detail on the name of the business, the directors, the shareholders and details on how the business will be run. All the forms you need are available online or directly from Companies House.

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Quick and easy setup with BrooksonThere are just 3 simple steps to setting up your own Limited Company with Brookson. Our specialist advisors are on hand six days a week to advise you every step of the way. What’s more, if you are an existing Limited Company or switching from another provider it’s hassle free and we’ll even bring your existing accounts up to date for FREE!

n Incorporation: Our specialist advisors will work with you to incorporate your company at a discounted rate of £43.00 inclusive of VAT through our partner Jordans, which takes approximately 5 minutes over the phone. If you have previously incorporated your company we can assist you in reactivating it.

nBusiness bank account: We will assist you in opening a business bank account with RBS or Barclays – which is opened quickly and enables us to receive electronic daily updates of your business bank account, so we can advise you based on real time information.

nInsurance: We can provide you with a range of great value business insurance plans, which are specifically tailored for your business so you do not end up paying for anything you do not need. Our comprehensive coverage starts from as little as £31 per month.

If you are ready to set up a Limited Company and would like to work with Brookson

please go to: www.brookson.co.uk/join-limited


0800 230 0213


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6 Responsibilities and Dutiesas a DirectorIt is the directors’ responsibility to ensure that the company meets its obligations and that it is run in accordance with The Companies Act 2006 (and re-enacted). According to this act, all Private Limited Companies must have at least one director. Typically you will perform this role yourself. You need to ensure that the company complies with company law, that it accounts properly with full disclosure, that it makes all statutory returns, is adequately insured and meets all health and safety obligations.

Ensuring the company meets all of these obligations and complies with law, creates a degree of administration. You will be responsible for filing company accounts, arranging payment of Corporation Tax, National Insurance and PAYE obligations. Depending upon the turnover of your business you may also have to file VAT returns. These need to be done correctly, to the required specifications by the imposed deadlines, and any tax due must be paid on time.

In setting up your own Limited Company you will usually be a director and a shareholder of the company. There is a difference between the two. As a shareholder you own the company. As a director you are responsible for managing the company on a day-to-day basis. Directors have to abide by a number of duties as defined within the Companies Act 2006. These are captured in a statutory statement of seven general duties as follows:

n Duty to act within your powers as a company director.

n Duty to promote the success of your company.

n Duty to exercise independent judgement.

n Duty to exercise reasonable care, skill and diligence.

n Duty to avoid conflicts of interest.

n Duty not to accept benefits from third parties.

nDuty to declare interest in proposed transaction or arrangement with the company.

As a director it is your responsibility to manage the company in accordance with the Articles of Association and the law. Within this, you carry a number of financial and legal responsibilities.

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Financial responsibilities:Company accountsAll limited companies are obliged to maintain accurate accounts. It is your responsibility to ensure these accounts are completed and maintained to the required standards and that they are a true and fair representation of the financial position of the company. These accounts must also be filed on time, each year, with Companies House.

Changes to the accounting reference dateThe accounting reference date is the date to which the company accounts are prepared on an annual basis. If this needs to change for any reason, it is the directors’ responsibility to inform Companies House of the new date and to file subsequent accounts in line with it.

Corporation tax returnsA corporation tax return must be filed with the HMRC and any tax liabilities that are due must be paid by the imposed deadlines. It is also the directors’ responsibility to ensure the company stays solvent and is able to meet its financial obligations. This includes the payment of any suppliers, staff and compliance with all tax and National Insurance rules.

You also need to submit a Self-Assessment Tax Return, declaring your personal income, to HMRC at the end of each accounting year.

Legal responsibilities:Annual returnThe annual return must also be sent to Companies House each year, generally on each anniversary of the company date of registration. This covers a lot of the information that is currently on file about directors, shareholders, registered office and industry classification and is required to ensure that all records on file are accurate and up-to-date.

Change of registered officeIf a company moves, or you need to change the registered office for any reason, Companies House needs to be informed so the records can be kept up-to-date.


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7 Employment Status andComplying with IR35To gain the benefits of self-employment working through a Limited Company you must satisfy HMRC that you are genuinely self-employed. As a basic guide, if you are working from your own premises, using your own equipment and have several clients you probably fit the criteria.

The issue is a little less clear if you are contracted by clients to work on their premises. In this case you will need to ensure you comply with IR35 legislation and are not what HMRC view as a ‘disguised employee’. IR35 is the industry name given to laws set out in the Finance Act 2000. The legislation is intended to prevent individuals from avoiding tax by ‘disguised employment’ – working as self-employed contractors through their own Limited Company even though they do the same job as an employee.

The legislation is hugely detailed however, several court cases and judge’s decisions illuminate a few basic points. If you can answer yes to most of the questions below, it is unlikely you would fall foul of IR35.

n Do you have the freedom to do the work as you would like it to be done?

n Are you able to turn down work from a client for example, if you have another project on at the same time?

nCan you ask someone else to do the work on your behalf?

nDo you work for several different clients?

nDo you provide your own equipment?

nDo you have a financial risk in the project (do you correct errors in your own time, or give adjustments or refunds for poor service)?

n Do you regularly promote your business via advertising, networking or other marketing?

n Do you have a separate business telephone/website/insurance/office space?

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n Do you invest in training?

n Do you maintain detailed accounts?

n Are you VAT registered?

If you are caught by IR35 then all fees for that contract are ‘deemed salary’ and the employee rates of tax and National Insurance will need to be deducted. In addition, any expenses that you claim as tax deductible will be reduced.

If HMRC decides that your contract puts you within IR35, you’ll have to pay tax and National Insurance like an employee, rather than taking your director’s fee and dividends. So it’s important to make sure you’re paying the right amount of tax from the very start of each assignment.

If you feel you need to understand IR35 in more depth you can read our free Guide to IR35

Brookson Specialist Legal ServicesWe fully realise the legal side to setting up a Limited Company can appear daunting, but it doesn’t need to be. Our all-inclusive accountancy service is supported by Brookson Legal Services, a team of solicitors who provide key support to contractors, freelancers and self-employed professionals on a daily basis. They are on hand to assist with employment status issues, contract issues, discussions with your agency or clients over contract terms or disputes as well as providing expert advice and assistance when employing additional workers.

What’s more, as part of Brookson’s all–inclusive Limited Company service, Brookson Legal Services will carry out unlimited IR35 reviews at no extra cost.

We have also negotiated an exclusive discount on Brookson Legal Services’ fees for our customers to make the cost of day-to-day legal advice more affordable.



0800 230 0213


http://www.brookson.co.uk/knowledge-centre/guides/free-guide-to-ir35/


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Your Limited Company is now registered, you have your Certificate of Incorporation and you are the director and shareholder of your own business.

It’s now up to you to give shape to your business and develop it into what you want it to be.

It’s time to start trading, but before you do there are a few other things to get right first. You only get one opportunity to start off in the correct way, to implement rules and processes that will ensure you meet your obligation and responsibilities a director.

1. Find an accountantOf all the professional services you will need when you are running your own business, the one you will use most often, and perhaps the most valuable one, will be a good, reliable accountancy service.

Ask them what other services they provide too. Will they complete your Corporation Tax returns, your own personal self-assessment returns? Any service they can provide that can help to reduce the administrative burden on you is certainly worth considering.

Perhaps most importantly, make sure that whatever accountant you choose can stay in regular touch with your business. Seeing your accountant once a year to compile you annual accounts is simply not enough. They will not get to know you or your business, the two fundamental ingredients of a successful company/accountant relationship.

2. Set up a new bank accountYou MUST set up a separate company bank account. Even if you are the only director and shareholder this is still the case. As we covered earlier, a Limited Company is a separate legal entity. It has its own legal rights and obligations. That means any profits and losses belong to the company.

A company bank account will not only allow you to keep your personal money separate. It will also ensure accountability and transparency in all of your business finances. It is really important to understand at this early stage that you MUST avoid using your company bank account as a personal account.


8 Starting to Trade

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3. Consider business insuranceThe nature of your business and the range of services you provide will largely determine the types of insurance you should consider to ensure you are adequately covered. Insurances provide peace of mind that your business is suitably protected in the event of something going wrong.

There are three key types of insurance you should really consider when running a Limited Company:

Professional Indemnity (PI)PI protects your business against any claims for loss or damage made by a client should you make mistakes, or in some way be found negligent in the services you provide.

Public Liability (PL)PL protects you in the event one of your customers, or a member of the public, suffering personal injury or damages while on your premises. It also covers the reverse situation when, as a result of your negligence or lack of due diligence, you cause injury to a customer or any of their personnel, or even damage to their property while on their premises.

Income Protection (IP)IP insurance provides you with a replacement income allowing you to meet your financial obligations.

Brookson, through our preferred partner can offer an all-inclusive business insurance package specifically designed for the needs of contractors, freelancers and self-employed professionals – starting from just £31 per month.

4. AdministrationInitially, the administrative demands may seem intimidating but by acquiring the knowledge and setting the correct procedures from the outset, they soon become part of the process.

Know exactly what needs to be done, by when…As soon as you receive your incorporation certificate, start to plan ahead. Mark the key dates in your calendar by when you need to complete and return your company accounts, your annual returns and your tax returns. You MUST hit these dates, if you miss them you will be penalised.

Establish a routine…Make sure you allow time for your administrative duties such as logging business expenses and raising invoices and build these into your working week. The longer you leave it to establish a routine, the more of a mess it gets, the more stressful it gets and the longer it takes to fix it. Control it from day one, don’t let it control you.

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5. VAT registrationWhen you incorporate a Limited Company you are not automatically registered for VAT.

If your business reaches, or is expected to reach, the HMRC specified VAT threshold during any 12 month period you MUST register for VAT unless you meet either of the following conditions:

n You only sell goods or services that are exempt from VAT.

n You are not in business according to the definition that HMRC uses for VAT purposes.

The threshold usually increases each year. If you do have to register you are obliged to charge VAT on your invoices. This effectively increases the cost of your services by the VAT rate. It also means you can reclaim the VAT from any purchases you make for the business.

In some cases businesses choose to voluntarily register for VAT even if they operate below the threshold. Having a VAT number may help give credibility to the smaller business, making it appear larger then it actually is. However you may need to consider whether your company charging VAT has an impact on your price to your customers.

Flat rate VAT

Depending upon the size and nature of your business it may be preferable to register for the Flat Rate VAT Scheme. This offers a simpler way of accounting for VAT. Should you need it, further information on this can be found in our guide to Flat Rate VAT.

Either way, speak to Brookson. We can work out the most tax efficient way for you to pay VAT and help you to decide which, if any scheme, is best for you.



0800 230 0213



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About BrooksonWhen running your Limited Company we believe you should always know where you stand. Without the right accurate and up to date information planning and managing business and finances is left to chance.

We have a great team of people who work closely with you, every step of the way to help you work more efficiently and to make more of your earnings potential.

We have a great range of all-inclusive services too, supported by 20 years of skills and experience, so however you choose to work, Brookson has a solution and price point to suit.

Brookson’s Limited Company Service

Unlike some other providers who may charge additional fees for certain services, Brookson provide everything you need for one monthly fee, with no hidden costs.

n Expert advice from a dedicated support team, 6 days a week.

n No set up costs, exit fees or tie-in period.

n All VAT, tax and year-end returns completed for you.

n Operate compliantly with unlimited IR35 reviews.

n Fast and seamless set up within 24 hours.

n Secure online portal, accessible anywhere via computer, mobile or tablet.

n Know your tax position and how much you can withdraw with daily updates.

n Legal helpline, with access to free preliminary legal support.

Our experience and commitment to delivering accurate, up to date accounts is demonstrated by Brookson Connect: technology utilised to provide all the information you need about your finances brought fully up-to-date, every 24 hours.

Connect has been developed to make sure that providing us with the information required to keep you up to date is quick and straightforward. Designed for minimum effort from you, for maximum return, providing vital data at your fingertips as and when you need it. You can access your information from one place, even one screen if you wish, utilising the Connect dashboard.


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How worksWe connect everything you need; invoices, bank statements, expenses, VAT, personal tax returns then present them to you in one intuitive, easy to use application. Seamlessly available on your PC, laptop, your smartphone or tablet so you can stay informed, even on the move.

But that’s the easy bit…

We also reconcile your accounts for you on a daily basis so you don’t have to. With close to real time accounting where finances actually are; how much you owe the taxman, what you are due and what you can spend.

…and if you still want more

Drill as deep as you like, it’s all there. A planner app to keep track of key dates and an IR35 app to keep track of your employment status. We keep all of your documents in the document storage app and there is a knowledge centre app packed with valuable information about running your business. In fact, there is so much in there we decided to produce a brochure for you. You can get a copy at: www.brookson.co.uk/connect.

If you’ve decided you are setting up a Limited Company and Brookson is the right choice to be your accounting partner you can join us:

www.brookson.co.uk/join-limited

email: [email protected]


0800 230 0213

http://www.brookson.co.uk/connect/


mailto:[email protected]