If you’ve decided to set up your business as a limited company, it can be quite daunting if you’ve never done it before. You’ll need various forms, documents and ID to submit to Companies House – plus you’ll need to pay for it.
So how much does setting up a limited company cost? And how much will you need to pay an accountant to help you do it? We’ll explain everything in this guide.
What is the cost of setting up a limited company?
|
Item/service |
Cost |
|
Registering your company online |
£12 |
|
Registering your company by post (8-10 day turnaround) |
£40 |
|
Registering your company by post (same-day turnaround) |
£100 |
|
One-off accountant fee for setting up a limited company |
£300 on average |
|
Accountant fee for setting up a limited company when taking on monthly services |
Free, then £250 per month on average |
The cost of setting up a limited company online is just £12. As long as you have everything you need to set it up, and it will be limited by shares and use standard articles of association, this is the only cost involved.
However, if you prefer to register by post, this costs £40 for an 8-10 day turnaround, or £100 for a same-day service.
But what about if you want to use an accountant to help you set up your limited company? Accountants will charge an average of £300 as a one-off fee for setting up a limited company. While this seems like a lot of money, most accountants will also help you register for Corporation Tax and VAT, and can offer advice on how to structure your company’s share capital and how to be the most tax efficient.
If you decide to hire an accountant to help you manage your company’s finances on a regular basis, they’ll often help you set up your company for free to get you on board as a retained customer. Then, they typically charge an average of £250 per month for ongoing accountancy services for a limited company with low turnover. It all depends on the complexity of your company finances though, so it’s best to get in touch with a few accountants to get personalised quotes.
What do I need to set up a limited company?
You’ll need a few things to set up a limited company. Some are more complicated than others, so make sure you get advice from an accountant if you’re unsure.
1. A company name
You’ll need to choose a name for your limited company, and it can’t be the same as another registered company’s name or trade mark. You can use the government’s company name availability checker to see if the name you want is available.
The name you choose mustn’t be offensive, and it must usually end in ‘Ltd’ or ‘Limited’. If you registered the company in Wales, you can use the Welsh equivalents.
2. The names of your directors and company secretary
You must appoint a director (most often yourself). They are responsible for:
-
following the company’s rules
-
keeping company records and reporting changes
-
filing your accounts and your Company Tax Return
-
paying Corporation Tax
Some of these tasks can be tricky, which is why many directors hire an accountant to help them manage them. However, the director is still legally responsible, even if an accountant is carrying out these tasks.
You don’t need to appoint a company secretary, but some companies use them to take on some of the director’s responsibilities. Again, the directors are still legally responsible for the company even if they have a company secretary.
3. The names of any shareholders or guarantors
You need at least one shareholder, which is often the director. Speak to an accountant if you’re unsure how you should structure your share capital.
4. A memorandum of association
A memorandum of association is a legal statement that is signed by all initial shareholders or guarantors agreeing to form the company. If you are setting up your limited company online, you don’t need to write your own – it will be created automatically as part of your registration.
If you’re registering by post, the government website has a template you can download and use.
5. Articles of association
Articles of association outline the company rules and the rights and powers of the company shareholders and directors. You can use standard articles, known as ‘model articles’, or you can write and upload your own. Make sure you do this with a solicitor or legal advisor.
6. A completed form IN01
The form IN01 is the form you complete using all the information we’ve detailed above. You can fill out this form online or on paper. The form will ask you for at least 3 pieces of information about yourself and your shareholders and/or directors. This could include the town of you/your shareholders’ birth, passport numbers or National Insurance numbers.
What are the benefits of owning a limited company?
There are lots of benefits of owning a limited company, but it’s worth considering both the pros and cons before you decide to register your business as limited. Let’s take a look at some of the benefits:
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Reduced personal liability: You and any shareholders are only liable for debts up to the value of your shares in a limited company, unlike sole traders who are personally liable for all debts
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Lower tax: Sole traders pay income tax and National Insurance on the profits of their business through their self assessment tax return. However, limited companies pay Corporation Tax, which is lower than income tax. As a company director you can pay yourself a combination of a salary and dividends, which can lower your tax bill
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Easier to access loans and growth funds: Investors tend to see limited companies as lower risk, so business loans are easier to get if your company is limited
However, there are some disadvantages to owning a limited company that you should consider:
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More admin: Limited companies must keep many more records than sole traders, including records of company activities like voting decisions and submitting full or abbreviated statutory accounts
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Available to the public: Your business information will be registered on Companies House, meaning that anyone, including competitors, can see your turnover and find out about any business changes
Do I need an accountant to set up a limited company?
No, you don’t need an accountant to set up a limited company – but it can make the process easier if you use one. An accountant will know about all the paperwork you need to have to register your company and will be able to advise you on the best way to structure your shares and company finances.
Is it worth setting up a limited company?
Whether it’s worth setting up a limited company depends on a variety of factors. As we outlined above, you reduce your personal financial risk by having a limited company compared with being a sole trader. You can also save money on your tax bill.
However, having a limited company isn’t as attractive as it used to be. Directors used to be able to save much more in personal tax than they can now, making it cheaper to have a limited company than so it may not be worth setting up your business as a limited company until your turnover increases or you start to grow quickly.
It’s best to speak to an accountant if you’re unsure whether you should register your business as a limited company. Use our partners, Unbiased, to get in touch with accountants operating in your area today.
Estimates for common accountant services
| Job | Estimate |
| Setting up a limited company | £300.00 |
| Self assessment tax return | £200.00 |
| Bookkeeping | £225.00 per month |