You have been running a successful and growning business as a sole trader and now it’s time to think about taking the steps to become a limited company.
A limited (Ltd) company offers several advantages, including limiting your personal liability and creating a more professional image. But how do you actually make the switch?
This blog will guide you through the process of transforming your business into a limited company, breaking it down into manageable steps.
Is Limited right for you?
It is important to take time to consider if a limited company is the best structure for your business, and whether is fits in with your business plan. Here are some things to keep in mind:
- Complexity: Running a limited company involves more complex regulations compared to a sole trader. You’ll need to keep detailed financial records and file them with Companies House regularly.
- Taxes: Limited companies pay corporation tax on their profits, which can be different from income tax rates for sole traders.
- Costs: There are fees associated with registering and maintaining a limited company.
Steps to Becoming a Limited Company:
- Do Your Research: Familiarise yourself with the responsibilities and requirements of being a limited company. The UK government website offers a comprehensive guide.
- Choose a Company Name: Pick a unique and available name that reflects your brand. You can check name availability on the Companies House website.
- Appoint Directors and Shareholders: Every limited company must have at least one director, who manages the company. You will also need shareholders, who own part of the company. You will need to decide whether shareholders should all have the same type of shares.
- Prepare Your Documents: You’ll need a Memorandum of Association (outlining your company’s objectives) and Articles of Association (detailing how your company will be run).
- Register with Companies House: This is the official process of forming your limited company. You can register online or by post.
- Register for Corporation Tax: You’ll need to register with HMRC to pay corporation tax on your company’s profits.
- Register with HMRC: You will automatically be enrolled into corporation tax, but there may be other taxes to consider such as VAT and PAYE.
If you are currently a Greenwood Tax and Accounting sole trader client, and would like to discuss the move to becoming a limited company, please let Kathryn know.
