When starting up as a freelancer or contractor, you will want to consider what the best trading method is for you; below I will go over what is required whether you choose to trade as a Sole Trader or as a Limited Company.
Starting up – Limited Company
You can check out Part 1 on Sole Traders here
Starting as a Limited Company has more legislative requirements than being a Sole Trader, though it can be a more tax efficient way of operating, through taking a carefully planned mix of Salary and Dividends.
[dropcap type=”square”]1[/dropcap] To start up as a Limited Company, you firstly need to check that the Company name you have in mind is available. You can check this here for free. (this is the fun bit – you can call it whatever you want (within reason!): >Insert Name Here< Is Ace Ltd)
[dropcap type=”square”]2[/dropcap] At FW Accounting we will incorporate a Limited Company for you, free of charge, but some people choose to do this themselves online. At this point you can also decide if you would like any further shareholders in the business.
[dropcap type=”square”]3[/dropcap] Next on the ‘To Do’ list is to Set Up your Business Bank Account, which you have to have by law. To set up your business bank account you will require copies of your identification, along with your Incorporation Certificate for your Limited Company.
[dropcap type=”square”]4[/dropcap] HMRC will need to know that you are now the director of a Limited Company, and therefore classed as both an Employer and an Employee. This is when we would register your Limited Company with HMRC for PAYE (Pay As You Earn), and you for Self Assessment (to complete a Personal Tax Return at the end of the Year).
[dropcap type=”square”]5[/dropcap] Your Limited Company also needs to be registered with HMRC for Corporation Tax.
[dropcap type=”square”]6[/dropcap] Ask your accountant about VAT. Depending on your business it might be beneficial to you to register for VAT and this will outweigh the hassle of additional paperwork- or save yourself the stress and have your accountant complete your VAT returns.
[dropcap type=”square”]7[/dropcap] This is a great time to do a Tax Planning Example, we offer this to our clients to take into consideration all of their income and then recommend the most tax efficient divide of salary and dividends, and we can do the same for their spouse.
[dropcap type=”square”]8[/dropcap] Contracting? Before you start trading as a Limited Company, it’s a great idea to make sure that your contract with your end client is IR35 compliant. We provide our clients with an annual IR35 contract review to ensure that this is the case, through the IR35 experts – Qdos Consulting
[dropcap type=”square”]9[/dropcap] You may need Business Insurances. Such as Professional Indemnity Insurance (to cover claims should your client allege that they have suffered financial loss as a result of your error) and Public Liability Insurance (covering you for injury, death, property damage as a result of negligent acts).
[dropcap type=”square”]10[/dropcap] Once operating as a Limited Company full time, you will also want to consider Financial planning – i.e. cover such as Life, Critical Illness, Medical and Health protection as you will no longer have an employer to rely on should something un-toward happen to you.
[dropcap type=”square”]11[/dropcap] As soon as you start trading through your Limited Company i.e. you incur your first business expense -buy something for the business- or provide your first service and need to raise an invoice -so you can get paid- (please note you can’t raise invoices before your incorporation date), you will need to record these transactions somewhere. This is a good time to get an Accountant to help you out (like usJ), or start using online bookkeeping software (like FreeAgent). Whichever you do, make sure you don’t leave this to the last minute, the quicker you have an organised book keeping system, noting all transactions, the better – trust me it will save you a LOT of hassle down the line when you near your Accounts due date, or your Personal Tax Return due date.
[dropcap type=”square”]12[/dropcap] It’s time to generate some awesome clients! This is a good time to look for someone reasonably priced, and reasonably talented to set up a website for you. You can then further increase your online profile by setting up or updating your LinkedIn profile, a Twitter Account, and a Business Facebook page, you can look for other online places to populate your brand such as business forums and websites dedicated to your sector.
[dropcap type=”square”]13[/dropcap] Get yourself some business cards printed so that when you meet people you can stay in their mind and follow up by requesting their contact details.
[dropcap type=”square”]14[/dropcap] Now that you are a full blown Limited Company Director, and you have everything in place, you can look forward to getting everything taken care of by your Accountant, safe in the knowledge that you were organised right from the start.
Self Assessment – Q & A
Self-assessments. We have all heard of them, you maybe even know what they are. However, here at QAccounting some of our most frequently asked questions are about self-assessments. So below we have outline some of the most common questions we get asked, and the answers we get so tired of giving… just kidding.
Setting Up a Limited Company – 5 Key Things to Consider
If you are looking at going self-employed, then setting up as a Limited Company (LTD) may be the best option for you.
The Benefits of Having an Online Accountant
Here at QAccounting we are part of one of the UK’s largest contractor service providers. We started operating over a decade ago (around the same time DFS started their first sale) and have been dedicated to serving self-employed professionals ever since. One of the perks of choosing and accountant like QAccounting is that we offer all of our accounting services online.