I first got involved with limited companies last year with one that was set up for me and a friend by a third party. It cost about £250 but everything was done for us and we received beautifully bound copies of our documents by post.
When I decided to set up on my own, I talked to my accountant and we agreed that a limited company was preferable to being a sole trader and he offered me the same service but told me that I could actually do it myself for about a third of the price. Not being in a position to give away money, I took the phone number for Formations Direct, used my credit card for £70 and two days later, had my documents. It took a little longer to register myself as a director because there were some problems with the Companies House website.
When I made the announcement on Facebook, one of my friends asked about my Company Secretary and there was a general feeling that this was a requirement, although I had not been told that. Fortunately, Wayne came to the rescue with this from the Companies House itself:
“Private companies: The Companies Act 2006 requires a private company to have at least one director. A company’s articles of association may impose a higher minimum requirement for the number of directors. At least one director must be an individual. A private company does not need to have a secretary unless the company’s articles of association require it.”.
Backtracking a little, I made the decision to go limited because of the protection it gives over any liability for the company’s debts. Even though the internet is famous for being ‘the cheapest place to fail’ as a new business, I didn’t want to risk losing my house or any other assets to any potential creditors if it all went horribly wrong.
Other advantages are:
* There are no higher rate tax bands.
* You can give a share of the business to others, eg family or friends
* It may be easier to attract people to invest money in your business.
* In the event of a partner leaving or somebody dying it is easier to continue the business.
* It may be easier to sell the business.
* It can assist in the protection of a name.
* Suppliers and customers have more confidence in your business as they can check up on your limited company on the public records at Companies House.
The downside is that the preparation of the annual accounts is likely to cost more than it would for a sole trader and the public can check up on certain aspects of your business.
Not having an office as such, my accountant agreed to act as my Registered address for official purposes and I have a correspondence address for any necessary snail mail, although most things can be sent on line.
When it came to setting up banking, there were lots of institutions eager to have my business and offering all sorts of freebies although, contrary to popular belief, Santander (formerly Abbey National) no longer offer free business banking and even new businesses get charged £5 per month if they dont have at least £1000 going into the account.
Because I have been with them for almost three decades and so they know me, I set up my business banking account with my personal branch of LloydsTSB – can I just big up Sue and Barbara at the London Road, Leigh-on-Sea branch for their efficiency. I still showed them a copy of my passport but, they have my banking history and it just made things a lot easier. My whole business is based around social networking, it’s how I get most of my referrals and it seemed wrong to move away from that ethos when it came to my bank.
I get free banking for 18 months, after which I have to pay £5 per month. However, if you select the Electronic Business Tariff, from what I can see, all online transactions are free. It’s only when you are dealing with cheques that additional costs start to be incurred.
They also provide you with a free dvd containing Sage Planning for Business software and a 90 day free trial of Sage Start-Up, an easy-to-use day-to-day accounts package specifically designed for new businesses.