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Your Quick Start Guide to Setting up a Contractor Limited Company

SETTING UP A CONTRACTOR LTD COMPANY YOUR QUICK START GUIDE If you're a contractor looking at setting up a Limited Company for contracting, then this guide will answer all your questions about what's involved, how to get set up and why a Limited Company is the best solution for you. STEP 1 FORM YOUR LIMITED COMPANY Before your business can set up as a limited company (or become "incorporated") it needs to be registered with Companies House. You will need to complete a number of documents (such as the Memorandum of Association and Articles of Association) and return these to Companies House to complete the incorporation process. These documents are normally prepared by an accountant to ensure everything is completed correctly. Memo of Association STEP 2 OPEN A BUSINESS BANK ACCOUNT you have account in the name of your company. You can set up a business current account with the bank or building society of your choice. Once your limited company formed you will need a business bank STEP 3 CONSIDER YOUR VAT POSITION As a contractor it may be beneficial for you to be registered for VAT. It may also be advisable for you to register for the Flat Rate VAT scheme. HMRC introduced this scheme to make it easier for small businesses to account for VAT. In short, the scheme means you charge VAT to your client / agency at the standard rate of 20%, but to pay VAT to HMRC at a lower rate depending on your industry, For example, IT contractors pay VAT at 13.5% so it's definitely worth considering this option. STEP 4 REGISTER FOR PAYE (pay as you earn) All employees of a Limited Company are subject to PAYE & NI on any salary they receive from their company. The company is therefore obliged to register for PAYE and to account to HMRC each month for the PAYE & National Insurance Contributions that are due. STEP 5 ORGANISE PROFESSIONAL INDEMNITY INSURANCE Prior to starting your contracting role you will need to organise professional indemnity insurance, PII, in order to protect yourself from any claims of negligence, loss of data or documents, unintentional breaches of intellectual property or claims of dishonesty. A good level of professional indemnity cover (£1 million or more) will cost you approximately £300-400 per year. Your Agency or Client will insist on seeing proof of cover before signing a contract with your company. STEP 6 INVOICE YOUR CLIENTS & KEEP A RECORD OF EXPENSES Once you have everything in place you are then able to start invoicing your client or agency for your contracting work. However, in order that your accountant can prepare annual accounts and quarterly VAT returns you will need to keep a record of all invoices and expenses for the business. Some accountants will provide a spread sheet template for you to manually keep a record of all invoices and expenses, but these days, specialist providers will provide an online system to simplify these tasks for you. Created by Freestyle Accounting " Limited Company Contracting Made Easy! " freestyle accounting

Your Quick Start Guide to Setting up a Contractor Limited Company

shared by freestyleaccounting on Jul 11
Need to set up a Limited Company for Contracting? Find out how with our 'all you need to know', quick start guide at


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