Setting up own company

Chronicle · 15 Oct 2006 at 20:40

Hello,
If i were to start doing a lot of "online" work - such as web design/logo design etc, should I start up my own company? I am thinking about doing this (and this isn't a thread about if it would work etc...don't tell me i won't make money etc etc!!)

How would I go about this, and how complicated is it?

It'll only be a side thing, so won't even be making much at all.

Messiah Khan · 15 Oct 2006 at 20:54

I would imagine your bank is a good place to ask, as they will be able to advise you as to how to go about things, and may even be able to point you towards new business grants etc.

Pete/Sith · 15 Oct 2006 at 21:04

if its on the side...you need a website......wit some online portfolio.....also maybe contact smaller companies/ clans to ask if they want advertise on your site and you on theres and eventauly try and merge or summit wit a smaller company that has made a gd start

Chronicle · 15 Oct 2006 at 21:05

Hi
Thanks for your replies. I mean more about the legal side of things. I've read up a bit on the internet, seems its not too hard if i set myself up as a sole trader.

Geoff · 15 Oct 2006 at 21:22

Chronicle said:
Hi
Thanks for your replies. I mean more about the legal side of things. I've read up a bit on the internet, seems its not too hard if i set myself up as a sole trader.

It'd dead easy to set yourself up as a sole trader. About the only thing you MUST do is notify the Inland Revenue that you've done so. You only have a limited time (30 days, 3 months, I don't remember) to do it.

But the implication of a sole trader is unlimited personal liability. If you do something that gets you sued, you have unlimited liability, which means your house, car, etc could all be at risk.

If you set up a limited company, you're only at risk to the extent of the assets of the company and to any unpaid share capital you have. So if the company has £100 shares of a nominal £1 each, and you own them all and have paid the £100 into the company, your personal liability (with an exception or two) ends there.

The exception is that you would presumably be a director of the company. As such, there are a LOT of things you are liable for. Also, the compnay will have a constitution which defines what directors can and can't do. If you wilfully break that, you can end up personally liable.

There's a large amount of extra detail in all this, but a web search ought to bring up most of it.

Perhaps the biggest single consideration is tax.

If you're a sole trader, you pay tax on taxable profits via personal taxes.

If you're a limited company, then it's the company makes receives any income. You then have to work out how to get it from the company to you. If you pay yourself a wage, that means the company pays things like Employer's NI on it, and once you've got it, you then pay employees NI and, of course, Income Tax on it.

If you don't take it out of the company as wages (which by and large is an tax-inefficient way of doing it), then it get's taxed via Corporation Tax, and any surplus can then be distributed to shareholders as dividends. You, of course, as an individual, have to declare such dividends to the Inland Revenue, and pay Income Tax on them (if you go over the relevant earnings levels, etc).

It's FAR to complex to go into any great detail in a post here, but I'm sure you can see that the tax implications of being a limited company or self-employed are a major factor, and that it needs careful investigation and consideration.

Oh, and the paperwork and administration involved in being self-employed is limited to keeping adequate accounts and filling in your tax return. There's a fair bit more involved with a company (like regular PAYE/NI returns, annual returns to Companies House, Corporation tax returns, and so on).

schnipps · 15 Oct 2006 at 21:24

I know a bit about this as i am the secretary for my gf's company. You dont HAVE to start your own comany up but if you are going to declare your income to the IR you will have to decalre yourself 'self empolyed' within 3 months of trading or get a fine.

The difference betweeen being self employed and being self empolyed with your own company isnt that much tbh. The main difference for having a company is; paying for a company name, you also need a company bank account and probably an accountant. If you just go the self employed route you can of course do it all yourself and file your tax returns online which you could technically do for your own company but i wouldnt advise it.

The company route incurrs less income tax however you need to have a secretary and you would be the director. YOu cant do it alone you must have at least another person.

To sum up if u are gonna go the company route get an accountant, prices vary massively but 400-500 could see you set up with a years accounts done on a small scale, ie just you working for the company.

For the self empolyed route just do it all yourself.

If it was me and from what u are saying i would go down the self employed route for a year and see what income you have and then consider the company route.

Chronicle · 15 Oct 2006 at 21:24

Thanks for that post

Helped quite a bit

Cheers

atomiser · 15 Oct 2006 at 21:26

i too have been looking at setting up my own company. for me it would be pc repairs, hopefully for more business oriented customers rather than peoples personal machines... euggh

again, i would like to do this on the side of my day to day work. there doesn't seem to be much information out there on how to do this. i mean yes, fine, there is lots of information about the different types of company you could start but the whole financial aspect of it, for me, is very daunting. by the looks of it you have to fill a HUGE form out that combines your full time income with your 'on-the-side' income. from this form it sounds like they calcuate the amount of additional tax you owe them and then they send you a bit fat bill! that's probably something i would have wanted to offload to an accountant! plus you have to register your company name somewhere... which i can't do because im in rented accomodation and my tenancy agreement strictly forbids it. then there is the whole legal side of it, plus the fact that i would have had to get liability insurance etc. i think if i actually sat down and did the sums i would be working my socks off and wouldnt actually see much at the end of it! if anyone can shed any light then i would appreciate is as much as the o.p!

edit: crikey in the time it's taken me to write that two people have already replied with info! i havent read it yet, but you guys rule!

schnipps · 15 Oct 2006 at 21:36

atomiser said:
i too have been looking at setting up my own company. for me it would be pc repairs, hopefully for more business oriented customers rather than peoples personal machines... euggh again, i would like to do this on the side of my day to day work. there doesn't seem to be much information out there on how to do this. i mean yes, fine, there is lots of information about the different types of company you could start but the whole financial aspect of it, for me, is very daunting. by the looks of it you have to fill a HUGE form out that combines your full time income with your 'on-the-side' income. from this form it sounds like they calcuate the amount of additional tax you owe them and then they send you a bit fat bill! that's probably something i would have wanted to offload to an accountant! plus you have to register your company name somewhere... which i can't do because im in rented accomodation and my tenancy agreement strictly forbids it. then there is the whole legal side of it, plus the fact that i would have had to get liability insurance etc. i think if i actually sat down and did the sums i would be working my socks off and wouldnt actually see much at the end of it! if anyone can shed any light then i would appreciate is as much as the o.p!

edit: crikey in the time it's taken me to write that two people have already replied with info! i havent read it yet, but you guys rule!

I would reiterate what i said above, if you are unsure find a local accountant and go and have a meeting, they arent all expensive and this kind of thing is basic stuff for them, they could sort it all for you. To give you an example, my gf has her own company and is a hairdresser and rents a chair at a salon. For the company setup and a years accounts doing from the accountant was £450, so basically all we do is sign a few forms and give him her years income figures with any receipts for travel and kit etc, we then get a letter and documents telling us how much is owed tot he IR, thats it really its no biggy tbh. It sounds daunting but tbh it isnt.

Geoff · 15 Oct 2006 at 23:45

schnipps said:
.... so basically all we do is sign a few forms and give him her years income figures with any receipts for travel and kit etc, we then get a letter and documents telling us how much is owed tot he IR, thats it really its no biggy tbh. It sounds daunting but tbh it isnt.

Hmmm.

While that's true in as far as it goes, it's worth bearing in mind that if the accountant gets it wrong, it's still you that has the liability ..... and the fines and tax bill from the Revenue.

If you hand everything over to the accountant and don't keep your finger on the pulse, I hope you have a competent accountant. Not all are.

Geoff · 15 Oct 2006 at 23:49

atomiser said:
plus you have to register your company name somewhere... which i can't do because im in rented accomodation and my tenancy agreement strictly forbids it.

Well, there are companies that provide professional Company Secretary services (which gets past the point schnipps mentioned about needing a secretary and not being able to do it alone - and by "secretary" we mean company secretary, which is not someone that answers the phone and does the typing). And those self-same professional services will also act as the registered office, so being in rented accomodation need not be a block.

However, if you use these services, there will be a fee attached, of course.