Having just completed the process of forming a new limited company under UK law, I found myself frustrated by the number of steps required. In case I ever need to do it again, or a reader does, I thought it might be useful to set out the steps I took – hopefully I haven’t missed any! If it seems overwhelming, various accountancy or specialist firms can do most of it for a fee. Note, I am not an expert in this area, just someone who has done it once and recorded the steps – there is no guarantee this is completely correct.
First get the company formed. This will require a unique company name, a business address, and directors’ details. Forming the company can be done through Companies House, but I used Companies Made Simple to get things moving quickly. I recommend getting a Printed Certificate of Incorporation – it is needed in later steps.
In my business, clients require invoices to have a VAT number so registering for VAT was my next step. If you don’t need a VAT number straight away, you may wish to get a bank account first. Also, if the firm’s turnover is less than £68,000, registration is not required. There are a few other exemptions too, see more at the Business Link VAT guide. I applied for registration online through the HMRC Online website (click register) – the details required should be the same as for company formation. HMRC also runs a Flat Rate VAT scheme that is worth investigating. If it turns out to be useful then applying to join the scheme can be done at the same time as registering for VAT.
Get a bank account. This is quite important as many of the other steps need either bank details or a good reason why there are none (eg VAT registration). Most banks will require a Printed Certificate of Incorporation. I can’t recommend any good banks, and you should be aware that it can take longer than you think to open a business account.
Sign up to file company documents online at Companies House (click on File documents online). Even if the information given during formation never change, the company will still need to submit at least two forms a year to Companies House to stay registered (annual return and annual accounts). This is easy to do online. At the same time you can sign up for the PROOF system to make it harder for fraudsters to take control of the company by filing paper forms. However, be aware that once you have applied for online access, Companies House will (physically) mail some activation forms before you can file online.
If the company will be paying anyone a salary or expenses (directors’ expenses count) then you will need to sign up to PAYE. This can be done up to a month before payment. Again this can be done through the HMRC website (click register). From the employer’s perspective, I find PAYE a bit complicated. You should learn about it yourself – HMRC and Business Link are good places to start.
In the weeks after forming the company, HMRC should send you some forms to register for Corporate Tax. These need to be filled in and returned within 3 months of business activity starting. Filling in the forms will require the firm’s PAYE, VAT details, and the Memorandum of Incorporation (this should have been included as part of the formation process).
Insurance may be required and is probably a good idea anyway. My business area requires Professional Indemnity Insurance, so I organised this before beginning trading. There are many other forms of insurance which may be useful – my firm also has Employers’ Insurance and Public Liability Insurance. Business Link have a guide to help determine which forms of insurance may be required. I used an industry specialist insurer, which wouldn’t be useful to most readers, but I have learnt to shop around as different firms can quote vastly different rates (often the most expensive is multiples of the cheapest).
I recommend signing up to submit VAT, PAYE and Corporate Tax forms through the HMRC website. It is quite good and normally guides you through the process of completing a form; facing a long paper form fills me with fear. Also, if VAT is paid by direct debit (which can be set up online) HMRC will give you an extra week to pay (this can be done for PAYE too). After initially applying online HMRC will send activation codes through the mail to complete the process.
After that I advise you quickly sort out your accounts and construct a calendar of regulatory/tax events. Remember, every 3 months a VAT form will need to be submitted. Depending on payroll size, PAYE will need to be paid monthly or once a year in addition to an annual PAYE form (P35) and expenses form (P11D). Corporate Tax forms need to be submitted annually, as do Companies House returns and accounts. Staying organised and being able to quickly determine the financial position of the firm is very useful. Since my business is fairly simple and having completed a course on accounting at uni, I created a double entry book-keeping system in Excel. If you don’t feel you have the knowledge to do this (or the firm’s accounts are too complicated) there are various software packages and accountants that can help – I can’t recommend any.
In general, the HMRC and Business Link websites are very useful and well worth a look.