Are you considering converting your business to a limited company? It’s a process that is simpler than you might think, though it can be helpful to have an accountant help you set it up.
If you’re ready to move from solo to limited, there are a few things you should know. A limited company is basically its own entity. It’s like a person in that it can earn money, lose money, gain debt, and pay taxes. The limited company will also have its own bank account. Basically, it is a very separate thing from the business owner.
The Advantages of Having a Limited Company
Wondering what the big deal is about having a limited company? Well, there are some serious advantages to this method of doing business.
Reduce Your Taxes
You’ll find that you can pay less personal tax when you have a limited company. One way to do this is to become a shareholder and take out your income from dividends. It is a more efficient way to do things and you’ll find that you save quite a bit of money this way.
Separate Yourself from the Company
When you are operating as a sole trader, you and your business are essentially the same entity, at least when it comes to administrative purposes and taxes. However, when you move to limited, the company becomes separate. This allows you to have the business build assets separately from you.
This also allows you to have limited liability in that you aren’t responsible for a financial loss if your business loses money. It protects you from financial claims, unlike running your own business as a sole trader.
It Looks More Professional
From the outside, even if nothing has really changed with the actual business, a limited company looks more professional. In fact, some companies will only work with limited companies and you will find that more doors are open to you once you make things official.
You Can Claim Your Name
When you’re a sole trader, anyone could use the same business name. That ruins your image and can be a difficult issue to resolve. However, if you are registered under the Companies House as a limited company, your business name is protected. No one else can use it or a variation for that matter.
You Can Have Shareholders
As a limited company you can bring in shareholders and even raise money or take out a loan easier. That’s because your business is determined to be a separate entity. When you go in to get a loan, the loan officer needs to look at the business and not you for the loan. If a shareholder dies or decides to sell his shares, it will be much simpler if you have a limited company, too.
There are plenty of benefits to creating a limited company and it’s a good idea to research this well and talk to a business accountant before you get started.
How to Set Up a Limited Company
The first step in registering your business is to choose a name and decide where you want to base it. It’s a good idea to choose a name that can be used if you expand your business later. For example, if you are setting up a hair salon and call it Hair Beautiful, it will be harder to expand into nutrition teaching or products at a later date.
Next, you’ll need to divide up shares in the company. If there are multiple owners, they should get equal shares, or one person may own more shares and make the decisions. You can also bring in other shareholders, if you like, but you’ll need to pay a Stamp Duty at your HMRC office.
Since this can get a bit convoluted and complicated, it is a good idea to bring in a business accountant who can give you tax advice and help you figure out the division of shares.
Next, you’ll need to set up your company legally at Companies House. This can be done online, but again, you may want your accountant to handle all this for you. While it’s a simple process, you do need to assign a company director and a secretary. These roles can both be fulfilled by a single person if you need them to be.
Once you’ve set everything up, you have to file a Memorandum of Association. This is also submitted to Companies House and will indicate why you created the company and offer your plans for managing it. This needs to be set up by an accountant, since it is a document that will serve in any tax disputes or court cases.
A business bank account is the next step and this is something that can be difficult to do through High Street banks. You can use a service or an accountant to help you get this all set up. In fact, it’s probably simpler to have someone else manage it all for you.
They can set up the bank account in your company name and ensure that you have all the information for the account, then you’re free to use it for your business. Remember that you need to have a business account in order to run your business. It’s not allowed to use a personal bank account for business dealings with a limited company.
Finally, you’ll have to register for VAT. This is also done online and can be done on the HMRC website. Your accountant can manage the VAT for you and you just need to be sure that you bill your clients for it when you receive the registration. You can back bill for this, but you do need to explain to your customers what to expect.
Setting up a limited company can be time consuming and it’s often simplest to outsource this part of doing business. Your accountant should be able to handle nearly everything for you and that means you can focus on actually getting down to business.
Why You Need an Accountant to Handle Bookkeeping
A business accountant can be the best investment you make for your company. A huge number of small business owners don’t have an accountant and they are much more likely to fail, due to poor management of their finances.
If you don’t know where your money is coming from or where it’s going, you can’t stop the leaks and earn more. It’s a difficult decision, but you need a business accountant to help you make more money and stay on top of finances. This is where bookkeeping services come in handy.
A business accountant offers far more than just doing your taxes once a year. In fact, having an accountant to consult with can help you find the best deductions throughout the year and this is a very useful reason to hire one.
You’ll also save a lot of time and keep your business profitable if you hire a professional to manage your finances. An accountant can also help you figure out when a purchase is a good financial decision or a bad one and help you find opportunities to save money. It may be extra money you’re paying out, but it’s well worth it. You’ll save far more in the long run, in most cases.
How to Find a Chartered Tax Advisor
A simple way to find a chartered tax accountant is to look at accounting firms. They are going to be used to handling taxes for businesses, but can also offer many other services. A good tax accountant can help you by looking carefully at your business and making sure you have all your finances in order.
A chartered accountant will also stay abreast of any changes in tax or business laws that could affect you. When you hire an accountant to look after your finances, you free yourself up to focus on what you do best, make money. You can run your business and the accountant will handle the finance side of things, making life much simpler for you.
Whether you are looking at hiring an accountant to create a limited company or just to manage your taxes and handle bookkeeping tasks, you have plenty of options. You’ll find that this is a good way to invest in your company and ensure that you are following the law on everything.
Are you looking to set up a limited company? Let Barron & Co Ltd. help. We have Chartered Certified Accountants ready to help you get your business in order. Contact us today to find out how we can help.