How do I register my business?

To register a business as a sole trader, you need to:

• Register as self-employed with HMRC
• Choose a business name
  

Once you've registered, you need to fulfil your responsibilities as a sole trader. These include:

• Keeping records of your sales and expenses
• Submitting a Self Assessment tax return each year
• Paying income tax and National Insurance Contributions
  

To set up a limited company, you need to:

• Decide what type of limited company you need
• Choose a business name
• Choose how to set up your limited company
• Complete the company formation process
• Open a business bank account
• Inform your stakeholders
• Get your VAT registration or transfer sorted out
• Set up your payroll
• Update your company details
• Get your books sorted out
  

To set up a business partnership, you need to:

• Choose a business name
• Choose a ‚Äònominated partner'
• Register with HMRC

There are a couple of ways to go about registering a limited company:

• Register directly through Companies House
• Go through a third party: An accountant or company formation service can help you process your application, significantly lessening your admin burden. Beyond the application, a good third-party service can also provide accounting advice, help you fulfil your filing obligations and assist with other admin tasks.
  

We've included further details in our guide on setting up a limited company.

While there isn't a legal or formal definition of the term, personal service companies (PSC) refer to limited companies that are owned by a contractor, who is also the only shareholder and sole director. In some instances, the company may also be owned by a very small group of individuals.

What are the advantages of a private limited company?

In the UK, the majority of self-employed people operate as sole traders. While there are many advantages to being a sole trader, you could take home more money and give your business a professional edge by setting up as a limited company.

In this article, we'll look at the advantages of operating as a private limited company to see how it could benefit you. If you're interested in seeing whether a limited company could be a good option for your business, check out our Business Structure guide. If you're already operating as a sole trader, making the jump to a limited company is more straight forward than you think.

Advantage 1 ‚- You pay less tax and National Insurance Contributions

Who can turn their nose up at the prospect of increased take-home pay? Well, that's the principle benefit of setting up a limited company and one of the main factors that drive people to switch from a sole trader.

As a director of a limited company, the way you pay tax is different from how you pay as a sole trader. As a sole trader, you'll pay 20% or more on everything you earn over the tax threshold. As a limited company, you typically pay yourself a small salary so you incur as little personal tax as possible. The majority of your income will come in the form of dividends that are taxed at a much smaller rate, meaning you're able to maximise your take-home pay.

As well as the tax benefits, paying the majority of your income through dividends means that you're able to pay less National Insurance Contributions (NICs) as these do not apply to dividend payments.

Example - Here's a quick comparison of the difference in take-home pay for a sole trader and a limited company.

1. Sole Trader
   Revenue: £40,000
   Expenses: £1000
   Tax at 20%: £5,300
   Class 2 NIC: £158.60
   Class 4 NIC: £2,655
   Take-home pay: £30,886.40
   
   
   
2. Limited Company
   Revenue: £40,000
   Expenses: £1000
   Corporation tax: £5741.04
   Dividend tax at 7.5%: 1,406.92
   Take-home pay: £ 31,852.04
   

As you can see, you save £965.64 as a limited company. What's not to like?

The advantages to setting up a limited company are:

• Owners aren't fully liable
• Tax savings
• Using a limited company structure lends credibility to your business
  

When you set up a limited company, you'll enjoy many advantages you don't get as a sole trader. Not only is it a tax-efficient way to run your business, it's also a great way to limit your personal liability and increase your credibility with customers. Additionally, it could open new avenues of work that wouldn't be open to you if you were operating as a sole trader, especially some contractor roles.

One of the disadvantages of running a limited company is that it involves a lot of paperwork, but with the help of this guide, we'll clear away the jargon and tell you exactly what you need.

If you're unsure about whether a limited company is right for you, check out our handy article comparing the differences between Limited companies and Sole Traders to see which business entity is right for you.

If you've got more important things to do than dealing with extra admin, you can always take advantage of one of our accountancy packages and we'll do all the forms and applications for you.

The advantages of operating as a limited company are well known. It can be a great way to maximise your take-home pay, improve your credibility with customers and limit your personal liability. Like most things in life, it's a case of what's best for your situation. While the positives outweigh the negatives for most people, there are a few things you should know before you make the jump to a limited company.

In this article, we'll outline the disadvantages of operating as a private limited company. Bear in mind that there are many advantages to a limited company and in many cases, these advantages will outweigh the disadvantages, so don't think of this as a report of doom and gloom.

If you're looking to the future with the hopes of beginning a journey running your own startup, chances are you're feeling some mixture of excitement, trepidation, and uncertainty when it comes to the finer details of your plan.

Starting your own business is an immensely fulfilling process and an excellent means to flex your creative muscles, but there's a lot of humdrum of business behind the process of turning a vision into a dream.

One of the most important (and one of the earliest) decisions in this process will centre around your business's formation. You'll have to select which type of business structure best suits your goals for the future.

While the choice may sound easy, you'll be well-served by giving the decision ample consideration. The business structure you select will have measurable implications on the way you make money and do business. It'll impact:

• How much tax you pay
• Your degree of personal liability should the business fail
• How much administrative work is involved in the business (both before it comes to fruition and over the course of its life)
• Your ability to finance and fund your efforts

If you make the wrong selection when it comes time to choose a business structure, you could be faced with a myriad of complications in the future.

Paying professionals for guidance and advice once things go wrong is costly and, for many, an embarrassing affair-performing research well in advance will ensure you're making the best choice for your company and that you can avoid losing out on money or pride later on.

To set up a limited company, you need to take the following steps:

• Decide what kind of limited company you need
• Choose a business name
• Choose how to set up your limited company
• Complete the company formation process
• Open a business bank account
• Inform your stakeholders
• Get your VAT registration or transfer sorted out
• Set up your payroll

There is no clear cut time as to when you should start working through your own limited company. With other routes available-such as operating as a sole trader, or working through an umbrella company-it is always worth weighing up what is best for you and your circumstances.

With that being said, if you plan to work as an independent contractor for the foreseeable future, opening your own limited company at the early stages can maximise your opportunities for reaping the benefits of having your own company straight away.

The drawbacks to setting up a limited company include:

• There are additional filing and reporting requirements to adhere to.
• Reduced privacy
  

There is no clear cut time as to when you should start working through your own limited company. With other routes available-such as operating as a sole trader, or working through an umbrella company-it is always worth weighing up what is best for you and your circumstances.

With that being said, if you plan to work as an independent contractor for the foreseeable future, opening your own limited company at the early stages can maximise your opportunities for reaping the benefits of having your own company straight away.

Registering a company is a one off cost of £12 and done through Companies House. However, there are a few different ways that you can get this fee waved with other business services that you need.

We'll walk you through how to register your company for free and the perks that you'll get with each.

As a freelancer, contractor, or small business, it is typical to start with the simple structure of operating as a Sole Trader.

While taxes and other administrative work may be relatively easy when you are a Sole Trader, as your volume of business goes up, there are more and more reasons to take on the task of becoming a Limited Company.

For instance:

• A Limited Company protects your personal assets. If you are found liable in a lawsuit, only your business assets are at risk.
• A Limited Company is usually more tax efficient than being a Sole Trader.
• Once you have your name chosen as a Limited Company registered through Companies House, no one else can take your company name.

Luckily, running a Limited Company doesn't have to be exceedingly complex, though following a set plan will help to keep the complexity to a minimum.

• What is a Limited Company
• 10 step process for setting up a Limited Company