As a sole trader, you are directly besotted to the risk of losing all of your finances when faced with huge debts.
Do you want to know why? You do not have any distinction between your personal finances and that of your business.
Sadly, a large chunk of the self-employed cadre in the UK operates as sole traders. However, there is a solution. Setting up a limited company is the opposite of what you stand to lose as a sole trader; everyone loves the idea of not being bankrupt.
The process of setting up a limited company is fun and involves some official procedures that are worth it.
· CHOOSE YOUR COMPANY NAME
In setting up a limited company, there are some rules that guide your selection of the company name and things you should do.
- You cannot bear a name that is in use by another limited company.
- You must not use any word or phrase that sounds offensive.
- According to Companies House, if your company name is to include any of the words “group”, “holdings”, or “international” (or common variations of these words), they have to be justified.
- Once your desired company name doesn’t contain any sensitive keywords
- You can double-check by typing the name on google search if any related name pops up.
· CHOOSE THE COMPANY ADDRESS
Setting up a limited company requires that the company has a valid address. The address has to be in the UK or country of registration. It is possible to use the address of the manager of your Corporation Tax and even your home address when setting up a limited company. In the event that you desire to use a PO Box, you will require a postcode and also, a valid physical address.
· APPOINT THE COMPANY DIRECTOR(S)
In setting up a limited company, the role of the directors’ cannot be overemphasized; they are responsible for running the daily activities of the company. There is some vital information you should know about company directors:
- It is compulsory that a director is 16 or over.
- It isn’t mandatory for directors to live in the UK.
- The names of the directors are publicly available at Companies House; hence, it is important they have a good public image.
- Directors must provide a service address. This is compulsory.
- Directors are responsible for filing for Company Tax Return and pay Corporation Tax. You do not want to have directors who do not pay your company tax!
· DECIDE ON SHARES AND SHAREHOLDERS
In setting up a limited company, you have to decide if you will own all of the shares in the company or split it with others. You also need to decide on the different classes of shares. You will need to have handy the share of dividends the shareholders will get, the number of votes shareholders can get and if there are restricted matters any shareholder can vote on. The lower the share value of a shareholder, the lower the liability. The names and addresses of the shareholders will be required during the registration of the company.
· PSC- PEOPLE WITH SIGNIFICANT CONTROL
When setting up a limited company, it is required that the company tells the registering body the Person(s) with Significant Control. This is to protect the company from misappropriation or misuse of the funds of the enterprise.
· MEMORANDUM AND ARTICLES OF ASSOCIATION
The memorandum of association is a legal statement that must be signed by all shareholders, directors and the company secretary when setting up a limited company. Rules govern every facet of human endeavour. In setting up a limited company, the rules governing the enterprise are contained in the articles of association agreed upon by the aforementioned personalities.
Once all of the above have been done, you are now ready to register your company and register for Corporation Tax. Remember, when your financial security becomes a concern, it is time to incorporate.