UK Private Limited Company - Starting up what do I need to do?
August 25, 2016 3:41 AM Subscribe
I am converting from Sole-Trader to a Private Limited Company (for liability reasons). I am the Director (100% share-holder) and sole person who does "the work". Do I need an accountant or a legal advisor or both?
Mainly I'm wondering:
1. Whether I need Employers Insurance (since i'm the director/worker)
2. How I should pay myself for "the work" that gets done by me.
3. If I'm doing "the work" do I need a formal engagement between my person and the company?
4. Am I then an "employee" or can the "director" do "the work"? and pay themselves a directors salary?
5. Does this IR35 Thing Apply to me.
6. Is the PAYE / NIC stuff hard to setup?
Mainly I'm wondering:
1. Whether I need Employers Insurance (since i'm the director/worker)
2. How I should pay myself for "the work" that gets done by me.
3. If I'm doing "the work" do I need a formal engagement between my person and the company?
4. Am I then an "employee" or can the "director" do "the work"? and pay themselves a directors salary?
5. Does this IR35 Thing Apply to me.
6. Is the PAYE / NIC stuff hard to setup?
(To clarify - you don't need an agreement between yourself and your own company as you're a director. There will also be an incorporation certificate from Companies House when the company is set up. You'll need to keep all these documents).
Some clients, e.g. big banks and the like, may ask for certain kinds of insurance. You can arrange this very quickly - typically same day - using a company like Qdos, if required.
posted by plep at 4:12 AM on August 25, 2016
Some clients, e.g. big banks and the like, may ask for certain kinds of insurance. You can arrange this very quickly - typically same day - using a company like Qdos, if required.
posted by plep at 4:12 AM on August 25, 2016
nthing get an accountant - I've been doing this for 9 months and being a noob, the accountant's knowledge has been invaluable.
1. not entirely sure what that is but I have needed insurance for both my contracts thus far.
2. salary and dividends - try not to take the dividends as frequently as salary. apparently it's one of the markers for you falling inside of IR35
3. I don't think so - I don't have one
4. I'm the director, I pay myself a salary. try to pay yourself a salary which is not too low - again - this is a marker for potential investigation under IR35
5. only you know if the work you perform comes under the headings of supervision, direction, control - it will be up to you. read up on it (everyone has a different POV) and ask your accountant. I don't think it's a huge problem now but in the years to come these rules will become stricter and stricter
6. not if you get your accountant to do it :)
posted by mrmulliner at 4:14 AM on August 25, 2016 [1 favorite]
1. not entirely sure what that is but I have needed insurance for both my contracts thus far.
2. salary and dividends - try not to take the dividends as frequently as salary. apparently it's one of the markers for you falling inside of IR35
3. I don't think so - I don't have one
4. I'm the director, I pay myself a salary. try to pay yourself a salary which is not too low - again - this is a marker for potential investigation under IR35
5. only you know if the work you perform comes under the headings of supervision, direction, control - it will be up to you. read up on it (everyone has a different POV) and ask your accountant. I don't think it's a huge problem now but in the years to come these rules will become stricter and stricter
6. not if you get your accountant to do it :)
posted by mrmulliner at 4:14 AM on August 25, 2016 [1 favorite]
I'm a lawyer who regularly acts in court cases involving small (often single-person) companies. I'd endorse what's said about getting advice and assistance from someone who understands the legal issues involved in setting up and running a company. I'd also suggest trying to get a basic understanding of company law, and in particular:
Other things to be aware of are that incorporating as a company does not somehow give you a magical get-out from liability to creditors (i.e .people you owe money to) - something all too many of the small company directors I see in court assume it does. There's a surprisingly common belief that you can just wind up a company and run away from your debts, but directors who try this as an easy get-out can find themselves learning the meaning of phrases such as 'trading while insolvent' and 'wrongful trading' (and later, 'convicted in the Crown Court'). Others assume they can get credit for their company with no come-back on them, and blithely sign the box on a credit application labelled 'Personal Guarantee by Director' without stopping to think that a promise to personally pay your company's debts if it can't means exactly what it says.
In short - find a good accountant, learn the basics of what running a company actually means, and act responsibly as a director. And if you think things are going wrong, get advice sooner rather than later!
posted by Major Clanger at 2:14 PM on August 25, 2016 [1 favorite]
- The concept of a company as a distinct entity
- How shareholding works
- The duties of a director
- The basics of accounting and how to understand simple company accounts
- Basic insolvency law - so you know how to avoid needing to use it!
Other things to be aware of are that incorporating as a company does not somehow give you a magical get-out from liability to creditors (i.e .people you owe money to) - something all too many of the small company directors I see in court assume it does. There's a surprisingly common belief that you can just wind up a company and run away from your debts, but directors who try this as an easy get-out can find themselves learning the meaning of phrases such as 'trading while insolvent' and 'wrongful trading' (and later, 'convicted in the Crown Court'). Others assume they can get credit for their company with no come-back on them, and blithely sign the box on a credit application labelled 'Personal Guarantee by Director' without stopping to think that a promise to personally pay your company's debts if it can't means exactly what it says.
In short - find a good accountant, learn the basics of what running a company actually means, and act responsibly as a director. And if you think things are going wrong, get advice sooner rather than later!
posted by Major Clanger at 2:14 PM on August 25, 2016 [1 favorite]
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An accountant can advise you on all the above.
Some of the clients you might work for might need insurance due to their own requirements, but it's not required of you.
You pay yourself for the work through a combination of salary and dividends. A low director's salary (e.g. minimum wage, every month) combined with high dividends (whenever you like) is the typical model as it's the most tax efficient for most people.
You don't need a formal engagement between yourself and your own company. It's advisable to have one between your company (signed by you, as director) and your clients, if applicable.
Yes, the director can do the work.
Basically, yes you need an accountant in general, and they can help with a lot of this, including the company set up (at Companies House) and how to best pay yourself for tax purposes.
Good luck!
posted by plep at 4:02 AM on August 25, 2016