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
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Year end accounts submitted
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Bookkeeping software provided by Freeagent
Payroll processing for 1 director
Limited company accounting analysis, news and expert opinions
There are lots of reasons you should choose a good Umbrella company. Click here to find out what you should look for.
There are many myths floating around about IR35, which can be confusing. Here, we set the record straight on many IR35 misconceptions.
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