Setting up a limited company
A limited company is a separate legal entity and while operated by the shareholders and directors, it has its own income and expenditure, can enter into its own contracts and will pay its own taxes, completely separate from any owner.
A director and shareholder is responsible for the day to day operations, compliance and ensuring accounts and tax returns are completed and submitted on time.
There are minimum requirements that must be followed when you operate a limited company and this should be considered before you contemplate choosing this route as a way of contracting.
What are the requirements
A limited company does require it’s own bank account to receive income and pay expenses. It is important to note that the bank account must not be used for personal expenditure by the directors.
All payments to the director and shareholders must be declared, usually as salary or dividends and these payments could potentially be taxed on top of what tax the company pays.
As a minimum, accounts and tax returns must be produced and submitted. However, depending on how the company is set up, it may also need to calculate and submit VAT and PAYE returns on a regular basis.
What are the advantages
Limited liability status
Since a limited company is its own legal entity, this provides a level of protection against any wrong doing by the company to the directors and shareholders, assuming all rules have been followed.
You can typically choose how you want to take money out of the company and make use of the most tax efficient method based on your circumstances’
In recent times, operating under a limited company does provide reassurance with your customers that you are a professional and compliant business. In fact in some sectors, it is mandatory to operate a limited company.
Limited company vs Umbrella
Are you not sure whether you are better off working through a Limited company or an Umbrella Company?
This video, presented by Chris James Director of Accounting Services at JSA Group and Chairman of The Freelancer & Contractor Services Association (FCSA) will talk you through the differences of each option to help you make an informed decision as to which will suit your situation best.
How can JSA help with your limited company
Expert & Professional
We’ve been providing professional, expert accountancy services for 30 years.
We ensure our services our fully compliant so you don’t need to worry.
Your own expert and experienced accountant, providing unlimited advice.
Fully comprehensive service providing all your accounting needs.
Free Accounting Software
Market leading, MTD-approved online software and mobile app from Freeagent.
We provide a bespoke accounting service to you and ensure you are expertly taken care of.
Unlimited support to ensure you get the best possible advice from your accountant
Accredited with the FCSA and IPSE to ensure our standards are second-to-none.
Our monthly service includes everything you need
Fixed fees of £120 + VAT per month
Your own expert dedicated accountant
Clear tax efficient advice and health checks
MTD compliant VAT returns
Year end accounts submitted
Self Assessment tax return
Expert IR35 advice and contract reviews
Bookkeeping software provided by Freeagent
Payroll processing for 1 director
Limited company accounting analysis, news and expert opinions
Preparing your agency for IR35 reforms now will give you a competitive advantage over other agencies. Read our second tip here.
Preparing your agency for IR35 reforms now will give you a competitive advantage over other agencies. Read our tips here.
Here we detail some guidance for limited company contractors looking to schedule some time off.