What you need to Consider when Running your own Limited Company

Setting up your own limited company is quite a task, not to mention a big responsibility.

• Contractors sometimes think that running their own limited company is their best option. This is not always the case, though. There's a lot of input required, on an ongoing basis. It can be just be too much for the contractor.
• Many contractors who previously managed their own limited company, come to the conclusion that the extra workload was just not worth their while. See our introduction to an umbrella company for further information.

Even setting up the limited company in the first place requires a fair degree of work. To start with there is: the registration at Companies House (don't forget Forms 10 & 12), Articles and Memorandum of Association, the Appointment of Director, appointment of Secretary, accounting reference date.

Once that's done, then there's even more to do, including: a registered office address, opening of business bank account, VAT application, payroll scheme application, corporation tax reference application, accounting system, IR35 status, shareholding structure, salary levels and expenses.

As soon as the limited company is formed, there immediately starts ongoing chores to complete, often on a weekly or monthly basis.

Ongoing Contractor Chores when Running Your Own Limited Company:

1. Annual Returns completed each year to update Companies House, with a fee.
2. Dealing with HMRC in respect of company income and personal income.
3. Completion of annual corporation tax returns and paying taxes within a set time.
4. Monthly record keeping to a set standard.
5. Raising invoices in the correct manner.
6. Credit control.
7. Ensuring prompt payment from clients and chasing the inevitable late payments.

As if that's not enough, as a company director, the contractor must understand a mass of rules and regulations associated with all limited companies.

Various Rules & Regulations of Limited Companies:

• All limited companies must keep accounts and file accounts with Companies House.
• Directors are personally responsible that the accounts are delivered on time, and can be penalised if the annual accounts are late.
• Accounts must be produced to a set standard.
• Annual returns (Form 363), it details the information held on its records. The details need to be checked, signed off and returned within 28 days with a fee.
• Change of accounting reference date - Form 225, every company has an accounting reference date, which is the date to which the company's accounts are prepared each year. This date can be changed using Form 225.
• Change of registered office - Form 287, every company must have a registered office: it is the 'home' of the company to which all official documents, notices and court papers have to be sent by law. The address must be a physical location, not just a post office box.
• Change of directors and secretary and their details - Forms 288, Changes to any persons must be sent to Companies House within 14 days of the change.
• Corporation Tax. This is the tax that companies pay on their profits. Your must send the taxman a Tax Return together with a copy of the accounts.
• PAYE is the "pay as you earn" income tax that must be deducted from salaries before they are paid. This involves completing a PAYE registration form, keeping payroll records, paying PAYE & national insurance each month.

This is why some contractors feel managing their own limited company is just too much extra work to take on, over and above their contract work.

Sympathy with the Devil

We have sympathy with contractors in such a situation, especially when they're expected to understand complex legislation and detailed processes which are not part of their professional knowledge bank. Find out what an umbrella company does for a contractor.

This is why the umbrella company option is so ideal for today's busy contractor. The only thing a contractor has to do when they use an umbrella company is send in their timesheet.

The success of the umbrella company service comes from the policy of making the contractor's working life as simple and as hassle-free as possible.

We detail the six ways to judge an umbrella company to help you make the right choice.

If you're a contractor and currently manage your own limited company, why not think about using the services of an umbrella company instead? Apart from being cheaper than the accountant's fees you're paying now, you'll get your life back!