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What is a Limited Company?
A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances.
What is a Sole Trader?
If you start working for yourself, you’re classed as a self-employed sole trader – even if you’ve not yet told HM Revenue and Customs (HMRC).
As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them.
You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone.
You’re personally responsible for any losses your business makes.
The key Advantages and Disadvantages of Companies are shown below.
How do you form a Limited Company?
You can form your company directly with Companies House for £15, it normally takes 24 hours
- the company’s name and registered address
- names and addresses of directors (and company secretary if you have one)
- details of shareholders and share capital
Personally, I find it easier to use a formation agent such as Company Wizard for £16.99
Often using an agent will mean the company is formed quickly, sometime within a couple of hours.
What are the next steps?
Once your company has been formed you need to:
- Open a bank account for the Company, this can often take a couple of weeks
- Register for Corporation Tax
- Register for other taxes (if they apply to your business) – VAT, PAYE, CIS
- Appoint an accountant (recommended but not compulsory) – Form 64-8
- Set up your accounting software
- Create shareholder agreements, contracts and other legal documents (if required)