Setting up a limite company

amazingtrade

amazingtrade

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When I graduate I intend to find work but this will take a while, so in the mean time I want to create that DVD I have mensioned on here before, the problem its quite a risky venture, I will have to put some money of my own into it, is there any way you can setup a limited company without having the hassles of VAT and co-operation tax returns? Does the amount of legal red tape depend on the turnover or is it the same weather the turnover is £1 or £25 million?

Also is a limited partnership worth bothering with? The problem is I want to do this proberly because if it takes off it could lead to bigger and better ventures but if it fails I don't want to end up loosing money.

I suppose my question is is running a part time limited company a viable option?
 
Limited company costs a few quid to start up - I think the best way to do it is find a recommended accountant, and get them to do it. Cost us just over £100 including Company House and accountant fees, and that also included the accountant setting up a PAYE scheme for us..
Tax options are much better than with a partnership or sole trader set-up, and of course it's limited to the company's own assets, so if you put money in you're a creditor, and can take it out at any point - i.e. it's never a company asset.
And VAT registration is mandatory if your turnover is more than £50k per year, and of course if the business you're in is liable for VAT. My company isn't, as my business is VAT exempt. Check on the Inland Revenue website - there's a big and impenetrable guide to VAT!
The positive thing about being registered is that you can claim any VAT back on anything the company buys, so you can expect a cheque every quarter.
The negative side is that you have to do returns every quarter, and you have to send them a cheque if you made any money that is liable to VAT.
Hope that helps!
 
You'd be mad to set up a limited company as a first move, unless you know a good accountant, being a company director puts obligations on you that you don't have as a partnership (I'm both a company director and a partner in a consultancy, take my word for it...)

-- Ian
 
I suppose as this is just a test the accountant fees will be as much as the total investment anyway so I have nothing to loose by not being a limited company in that sense. I will look into the partnership thing, though it probably won't be worth my while bothering with.

I won't need to bother with VAT as I will have a very low turnover, I just hate doing stuff like this unofficialy because it just feels very delboyish.
 
sideshowbob said:
unless you know a good accountant,
Click to expand...

That'll be me then ;) (not fully qualified yet though - still a couple of exams to go :( )

AT - I certainly wouldn't expect corportation tax to be top of your list of concerns. Tax was never my favourite subject, but IIRC :

- Corporation Tax rate is at 0% for those with 'profits' (not profits as you know it, but Profits Chargeable to Corporation Tax (PCTCT)) < £10,000

Above this, the rate varies depending upon the PCTCT (within set limits), with the maximum being 30% (when PCTCT > £1.5m)
 
Hi,

I agree with Ian (sideshowbob), that I would think carefully about starting off as a limited company. As a Ltd company you need to do more things by the book. you need directors, Memorandum of Association, Articles of Association, Statement of nominal capital, List of directors etc. You need to publish your annual account to companies house annually. This means anyone can see your financial status. You do need a good accountant.


Depending on what you are doing and how you want to go about it, you can start off as a sole trader. This is the easy way to get going. You only need to inform the tax inspector and contributions agency of your intentions and you can begin to trade.

Here is a site to outline the ins & outs.

http://www.businessbureau-uk.co.uk/new_business/index.htm

You need to have a business plan sorted.

SCIDB
 
I don't see why you would want to be a limited company for this purpose. It can help protect you personally from creditors, but I guess you will be the main creditor....

FWIW small businesses can opt for various less onerous VAT regimes, percentage of turnover, annual payments, stuff like that. I prefer to keep reasonable records and do it quarterly. But I don't issue many invoices.

Whatever you choose try and do a sort of business plan, get a bank account and keep records.

Paul
 
The business plan will be quite comprehensive, don't even know why I am even thinking of this yet as I am not even starting to plan it till June. Just feeling all entrepeneurial at the moment.
 
Have you looked at what funding (grants, loans and things) you may be able to get from various bodies for starting a business? Do not sniff at any form of income from whatever source after all OPM is always the best way to go!
 
auric said:
Have you looked at what funding (grants, loans and things) you may be able to get from various bodies for starting a business? Do not sniff at any form of income from whatever source after all OPM is always the best way to go!
Click to expand...

Yep there is somthing I hope to take advantage of but it will only work if I am doing this full time, and the moment it is only a part time thing, its just somthing to do when I come home form work so I am not bored.

I am hyper active you see, I won't be happy until I am running half a million businesses and die from stress.

There are city generation schemes where you can get grants if you have a good business plan on the grounds that you employ x amount of local scallies.
 
AT get the advice of a good accountant on the benefits of being ltd vs sole trader vs partnership etc.

I am setting up a ltd company as we speak, and I wouldnt be doing it if there werent advantages.

Whether its a worthwhile move for you in your own personal circumstances though isnt something you're going to get good advice on in here IMHO. There are a lot of variables, and lots of pros and cons.

The cost of setting it up is about 40-50 quid if you do it yourself.

Chris
 
my advice, from limited knowledge of doing it myself:

go "sole trader" - you dont register anywhere, just with the inland revenue. i'm fully employed elsewhere, my "business" as a sole trader is purely in my own time, but it makes me self-employed (apparently) or at least part self employed. so i have to fill in tax returns, although my 9 to 5 job is paye.

get an abbey (national) business account, it's free banking for life (within certain limits). very easy application. a simple applicaion form, not much to complete. i was accepted and had the business cheque book, paying in book, and visa debit card very quickly. you deposit minimum of £50 to open the account.
see http://www.anbusiness.com/
 
Thanks, I guess when I am running it from home I and have little capitol it may be not worth the hassle, especialy if this venture fails. If it does work out though I will probably setup a LTD company quite soon, as what I will probably end up running is a very hi-tech company.

I was planning to use my bog standard Abbey national savings account but I don't even get a debit card with that, I have a personal card but I would like to keep business seperate from my personal accounts. It would make calculating income tax much simpler.

The other problem is my best mate is helping my out a bit and he will need paying so I need to get some kind of contract up for that, to make matters worse he works for inland revenue!

I will speak to the business creation unit at my university as there is a good chance they may help me set it up, I know the company I work for was setup in the exact same way. Although they had a lot more qualifications and a lot more money than me.
 
same thing for me, wanting to keep everything separate for simplicity.

abbey business account is the simplest and free banking too - my cheques even say "rocket systems, pc and inetrnet solutions" which is cool - apart from them mistyping "internet" as "inetrnet" ! (debit card has your own name on it though.)

also not sure if latest abbey wheeze of "have your own picture" visa cards extends to the business accounts - cos that would be cool !

re paying someone else, they become your employee, you are the employer, you have to pay national insurance from their wages etc. not sure about deducting income tax at source, i.e. paye. so there are complications there, not just contractual, like statutory sick pay, holiday entitlement etc.

this may sound like overcomplicating things, dont know if you can employ him a different way, like pay him as if he was offering you a service, like a sub contractor, rather than employing him yourself.

also as you become self employed, you have to pay national insurance @ rate of £2 something a week. the inland revenue will start to bill you as soon as you register with them as (part) self employed. you can get exemption from this if your salary from the business is less than £4,100 for the year (or some figure like that) and then you dont pay any NI. remember, this is salary you take for yourself from the business, not necessarily what the business is making as profit.
http://www.inlandrevenue.gov.uk/leaflets/ca02.pdf

as you're working a normal 9 to 5 and this is just you working for yourself in the evenings, you're what's known as "self employed in your spare time". so definitely apply for the small earnings exceptions certificate ! (application is in that pdf link above)

you need to check out some sites for more info.
this should get you started: http://www.businesslink.gov.uk/bdotg/action/home

i dont take any salary from my business, all profit stays in my business account, and goes towards buying anything the business needs (one of the first things was a roll of "warranty void if removed" tamper proof stickers). i keep a little petty cash for buying stamps or other small items. and i keep every receipt !
 
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I've also recently set up a Ltd Co having gone back into contracting again.

Definitely worth speaking to an accountant - mine pointed out a new VAT scheme whereby I charge it at 17.5% but only have to hand over 12% of the total including VAT to Customs & Excise - so for £10K you charge £1750 VAT but only have
to hand over £1410!! Over the year that adds up big time. Part of this agreement is that you can't claim VAT back on anything but, in my case, unless I was going to spend £10K or so on business purchases (which I'm not) then I'm better off with this scheme/loophole.

Matt.
 

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