Making the move from Self Employed to Limited
So you've decided to make the move to limited? After forming your Limited company, you'll need to ring up HMRC and let them know you have changed
your company structure. They will need to deregister you as self employed and for all Class 2 National Insurances Contributions. Don't worry they are very used to people moving from self employed to limited so this should only take a few minutes.
If your accountant has formed your limited company you will need to give them a quick call to explain your intentions so they can work out your new tax bands and thresholds.
How to set up a limited company
Once you have made your decision to form a limited company, the process of actually setting yourself up is usually very simple and can be as easy as entering a few details onto our website. You will need to include:
- The director’s details – this will be you, and you will be responsible for the running of the business including managing the company bank account, dealing with issuing and chasing invoices, deciding how much of a salary the director can take from the business and handling dividends where appropriate.
- Details of the company secretary – you can nominate a company secretary, but there is no longer a requirement to do so since a change in legislation which took place in 2006.
- Details of any subscribers or shareholders – these are the people to whom dividends will be allocated from the company’s profits.
- A company name – you will need to choose a name for your company which is not already in use. There are various considerations to be taken into account when choosing a company name which can vary depending on your industry, your specialism, any existing reputation you may have. Most people choose something that they hope will be memorable and easily associated with the work that they do, and you can check whether your chosen company name is available using online tools.
Once you have completed all the necessary fields, your company will usually be formed within three hours of submitting the details. You will receive all the paperwork you will need to complete other important tasks such as opening a business bank account as well as registering for VAT and PAYE. Using Easy Accountancy’s service to form your limited company is an ideal way to keep your costs down, meaning that you can set up your limited company for just £125 plus VAT. This includes everything you need to begin trading through your limited company as well as extra support on the most effective way to structure your business and help with any other aspects of the process which may raise questions for you.
Some people choose to register a limited company and then leave it dormant in order to protect their business name with no intention of trading through the company itself, which is a legitimate way of ensuring that nobody else uses your chosen name. You will need to inform HMRC if you intend to allow your business to remain dormant, file dormant accounts once a year and file an annual return with companies house to confirm the statutory details of your business such as the registered office address.
Running a Limited company
Beginning to trade through your limited company may seem like a daunting step, however not much will actually change. Your working day will remain the same, and you will continue to record all your ingoings and outgoings on an excel spreadsheet. If your client asks to see proof of your status of a limited company you'll be able to show them your certificate of incorporation to prove your new trading status.
You might need to update your invoice template if you have opened a new business bank account. It is important to remember that all of your outgoings are dealt with through your business bank account, now you are trading as a limited company. Ideally also you should keep a record of all invoices you have raised and when payment was received. This will help you keep track of your finances. If your looking for a new invoice template, why not download Easy's simple free invoice template here.
If you have changed your bank account details, it's worth making your client aware of the change, so they update their accounting systems.
The money in your business bank account will be the company's money, so if you need to move any to your personal account, ideally you should speak to your accountant about the most tax efficient way to do it. Your accountant will be able to discuss your tax planning with you. Usually your accountant will plan your salary and any dividends. This will help your company maximise profits and save you money in tax.