If you have been working as a contractor you might have considered setting up your own limited company. We often speak to individuals who simply aren’t sure what the best approach is. Obviously this depends on the individual and their specific circumstances at the time but for some setting up a limited company could definitely have its advantages.
Once you have set up a limited company you will benefit from limited liability, in practical terms this means you can keep your personal finances separate from the business. This offers you financial protection if for some reason things don’t work out as planned. Operating a limited company also offers financial benefits, it can be the most tax efficient approach if you are earning over a certain amount.
It is worth remembering that by becoming a Director of a limited company you take on certain legal obligations and responsibilities. Every company director has a personal responsibility to deliver statutory documents to Companies House as and when required by the Companies Acts. These include:
- Submitting accounts & annual returns
- Giving notice of any change of directors or secretaries. It is also usually down to the directors to give notice of a change of registered office.
In addition to producing proper accounts and sending the required documents to Companies House you must:
- Comply with the law on areas such as health & safety, employment law and tax
- In some instances you may be responsible for the actions of your employees (if you have any)
- Remember as a director you are legally responsible for your company’s records, accounts and performance
Whilst there can be advantages, setting up a limited company may not be the right route if you intend to return to permanent employment, if you are just contracting in between roles or aren’t earning enough to make the tax advantages worthwhile. Some people also feel that the simplicity of working through an umbrella service suits them and their lifestyle better.
If you are currently considering your options then we’d be happy to discuss them with you and help you work out what would be the best approach to suit your circumstances. If you do decide to set up a limited company we can help and support you through the process. Just give us a call and we will advise on how to get your limited company set up.
