Good evening all,
What are the implications and costs of setting up a Limited company?
MD.
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Costs - low if you buy one 'off the shelf' and rename it.
Implications - you business accounts are visible for all to see depending upon the size of your company; there are various regulatory and reporting requirements on an annual basis.
The costs of ensuring that you are compliant and remain compliant are clearly higher than for a sole trader.
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A limited company cannot get you out of personal liabilities.
It is an offence to trade whilst insolvent etc.
There can be fines for late filing of accounts and other documents.
Accounts need to be filled annually. They need not be audited and they can be abbreviated as Netsur mentioned - basically the balance sheet is listed.
Shareholders, directors etc. are listed at companies house and therefore on beta.companieshouse.gov.uk/ as well as numerous other company listing companies.
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When I did it a few years back I set up the limited company myself. Buying one was around £100 I think whereas diy was about £15 and very simple.
But as above re accounts. I did have a service which did my invoicing, "payroll" and accounts etc www.crunch.co.uk/pricing/. All done online with proper people to speak to for advice as needed. (I have no connection with them any more, or interest in them, but they for me they did a great job for about 3 or 4 years)
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I set up a limited company over twenty years ago to handle an element of my earnings, Originally it was to take advantage of tax breaks and take dividends tax free up to £5k per annum. I had the same accountant virtually all of that time who served me very well. He dealt with all my personal and company tax, I manage the VAT.
If you are a high rate taxpayer now then in my view the benefits are less attractive nowadays, The tax free element of dividends is now £2k and above that your personal tax on the dividends you pay yourself is 32.5%. That is after corporation tax on company profits. However my earnings in semi-retirement are now much more modest and I also use the company as a way of obtaining very nice technology with the benefit of tax write down and VAT reclaim. I anticipate closing the company in the next year or two, possibly after upgrading my desktop Mac. All necessary business expenses of course.
With less tax benefits, accountants fees (£750-1000), separate bank account and fees, professional liability insurance (£150-350), admin hassle (especially VAT) I would not do it again now. I got caught for late payment of a tax bill some years ago - a £1600 fine! My fault entirely. I certainly would not contemplate doing it without a good accountant onside. Bearing in mind of course that if your accountant suspects a tax fiddle they are legally obliged to report it to HMRC and not to tell their client on pain of prosecution.
I would note that this a layman’s interpretation of what I understand to be the case. I could well be, and probably am, wrong in whole or part.
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Limited Company - Netsur
