Updated: Apr 7, 2020
Once you have decided on the form of your company – Self-employed, limited company or partnership - see my blog Self-Employed or Limited company? - use this checklist to ensure you are aware of all the rules and regulations for accounting and tax purposes.
(For a self-employed business checklist see self-employed accounting and tax checklist)
1 Choose a name
There are government rules on what names are acceptable, here are the basics:
· The name cannot be the same as another registered company – you can check using this link: Gov.uk company name checker
· Must usually end in ‘Limited’ or ‘Ltd’
· Cannot be offensive or contain a sensitive word or expression or suggest a connection with a government organisation
· you can find more details here Gov.uk check company name
· Check if a trade mark exists with the same name – use this link: Gov.uk check trade marks
2 Chose a Director/Directors
A limited company needs at least one Director to be appointed.
Follow articles of association (these are the rules of the company and you can opt for the standard set when forming the company).
1 Keep records
Company records – for example when you make a dividend payment to shareholders
Bookkeeping records – see my blog for more details: 5 steps for simple and effective bookkeeping
2 File accounts and a tax return – see the due dates here
3 Pay Corporation tax which will be due 9 months after the end of the company year end - see the due dates here
4 File a Confirmation Statement – this is to notify of changes of address, contact, or shareholding – once a year – note the due date as the company can be struck off if not completed! You can file this via your Companies House online account.
3 Decide on the Shareholders
Ownership of the company determines the shareholding.
If you are a sole founder/owner of the company you can issue all the shares to yourself. If you jointly own the company with others you will need to decide on the number of shares to issue to each owner. For example you can issue 1,000 shares at £1 per share, and 2 owners could pay in £500 each for the shares. Each would own 50% of the company. This share split also determines voting rights ie the right to vote on business decisions.
There are tax advantages to appointing others as shareholders, such as family members, where they may be subject to a lower tax rate on dividend income.
4 Consider rules for your type of business
If you are selling goods online, buying or selling abroad and/or store or use personal information, you will need to be aware of further rules for your business.
Make sure you check out these rules here:
5 Register the company
Limited Company – you will need to form a company – you can use a service (eg CompaniesMadeSimple.com) or do it yourself via Companies House Gov.uk form limited company
When forming a limited company you will need to have the following information to hand:
Directors names and addresses
Shareholders names and shareholding to complete the Persons of Significant Control (PSC) requirement
The company’s registered address – this can be your home address, a business address or you can use a central address - for example as provided by CompaniesMadeSimple.com
The company Standard Industrial Classification (SIC) code – you can view the list here Gov.uk SIC code list
You can register for Corporation Tax at the same time as forming the company – you will then receive separate tax documents from HMRC in the post.
6 Consider signs and stationery
Need to display signs at non home address if a limited company which include the name and registered address of the company
Stationery requirements exist on documents, publicity, letters, order forms and website including:
- the company’s registered number
- its registered office address
- where the company is registered (England and Wales, Scotland or Northern Ireland)
- the fact that it’s a limited company (usually by spelling out the company’s full name including ‘Limited’ or ‘Ltd’)
If you want to include directors’ names, you must list all of them.
If you want to show your company’s share capital (how much the shares were worth when you issued them), you must say how much is ‘paid up’ (owned by shareholders).
Invoices need to include the following information
· full company name, address and contact info
· a unique reference number
· the company/person you are invoicing name and address
· a clear description of what you are charging for
· the date the goods or services were provided
· the date of the invoice (if different from above)
· the amount(s) being charged
· the total amount owed
There are further rules for invoices where you are VAT registered – see more info here Gov.uk VAT invoices
7 Where to work – home or rented office
Working from home
Insurance – home insurance may not cover the items you need covered – and the activities for example using equipment – check the terms and conditions of your policy and if unsure call the broker to ask – there is no benefit to having insurance if it will be invalid if you need to make a claim
Permissions will be needed
- Mortgage company
- Landlord if a rented property
- Local council for Council Tax and business rates
The lease you and the landlord sign will determine the responsibilities you each have.
In addition to these there are certain aspects that are determined by law as follows:
Health and Safety
Repairs and Maintenance – be aware that you will need to return the property to the same condition (and if requested the same layout) as you took on. As such you could consider putting aside a fund that you can draw on to use to make the repairs. The more you change the configuration the more likely a fund will be needed
8 Taking on people
Agency workers and contractors
This is a straightforward way to take on workers – you will have a contract with the worker or agency that supplies the worker. Other than this you will simply pay the invoices that are presented by the worker/agency.
If you are taking on employees for the first time you will need to:
· Run a payroll – simple or software
· Pay employers NIC
· Provide a workplace pension for your employees
In addition the government point you to these 7 steps:
1. Decide how much to pay – you must pay at least the minimum wage
2. Check that someone has the legal right to work in the UK
3. Check if you need to apply a DBS check
4. Get employment insurance – you need employers liability insurance as soon as you employ someone
5. Send details of the job in writing to the employee
6. Register with HMRC as an employer
7. Check if you need to auto enrol your staff into a workplace pension
Health and Safety
You will always be responsible for the health and safety of your workers. This is a complicated area but more information and simple steps to follow to ensure the workplace is safe can be found here https://www.hse.gov.uk/simple-health-safety/index.htm
9 Taking money out of the company
There are several ways to take money out of the limited company as follows:
a) Repayment of loan – if you have put money or other assets (eg a laptop or pc) into the company you can take this out of the company if there are sufficient finds in the bank. There is no tax to pay in this case.
b) Expenses – if you have spent you own money or driven to a business meeting in your own car these expenses can be reclaimed from the company. They will reduce the amount of tax the company pays.
c) Salary – recommend a minimum to make use of the personal tax allowance – but be aware of NI – ask for spreadsheet with scenarios
d) Dividends – once the company has accounted for any tax due to HMRC the shareholders (which you decide on when setting up the company – see above) can take dividends. These will not reduce the tax the company pays, but will be taxed at a lower rate than salary for the director when they submit their annual tax return.
These can only be paid out of ‘distributable profits’ – this is different to profit – as an example the profit in a given period will need to be adjusted down for any Corporation Tax that will need to be paid at the end of the year.
In all of the above cases you need to keep records of the transactions flowing through the company bank account - see more here on keeping records 5 steps for simple and effective bookkeeping
10 Value Added Tax (VAT)
VAT is payable by any business when turnover in last 12 months is greater than £85,000
You would then register and pay excess of the VAT on sales over the VAT on purchases that can be reclaimed.
There are various schemes to consider including annual, flat rate and cash accounting. Each has conditions and pros and cons.
And you can reclaim the VAT paid before you registered:
4 years for goods or services still in the business eg stock or pc
6 months for services eg repair of printer still used in the business
See blog for more information VAT and the impact on a small business