It doesn’t cost too much to register your business as a limited company. But there are many additional costs you’ll have to take into consideration before you make the choice to register.
When you set up a business, eventually you’ll have to register it. Depending on your circumstances, you have some options here. You can register as a sole trader, as a partnership, or as a limited company. Head here to read our guide to registering your business, and here to read our guide to changing from a sole trader to a limited company.
If you register as a limited company, it essentially means that your business finances are separate from your personal finances. This is the major advantage to registering as a limited company compared to registering as a sole trader. If you’re a sole trader, you’re personally responsible for all of your business finances. So if your business ever gets in trouble, you’ll take a personal financial hit too. But as a limited company, your personal finances will be protected, no matter what happens to your business.
The catch is, there are a lot of costs associated with registering and running a limited company. But what are these costs? And is it worth it?
How Much Does it Cost to Set Up a Limited Company?
You pay money to get your business registered at Companies House. If you register your limited company using the paper method, it will cost you £40. But if you register online using the government’s digital services, it’ll cost you just £12. You can pay by debit card, credit card, or even PayPal.
How to Register as a Limited Company?
To register your limited company, you’ll need to provide at least three bits of information about yourself, and your shareholders or guarantors. These might include your town of birth, your mother’s maiden name, and your national insurance number.
There are many other things you’ll have to arrange before you register, such as a name for your business, your company directors, your secretary, your shareholders, and so on. You’ll also have to prepare certain documents agreeing how to run your company, and you’ll have to check what records the government will require you to keep.
Head here to read the government’s complete guide to setting up a limited company.
And once you’re ready:
The Other Costs of Setting Up a Limited Company
So you can register a limited company for as little as £12. This might seem like a bargain, and it is. But there are many other costs you’ll have to consider:
You need a director and a secretary. You could take these responsibilities on yourself. But if not, everyone you appoint will need a salary. You might also consider appointing an accountant or an administrator, to help you with the additional paperwork that comes with running a limited company. Again, these will cost money.
Business Bank Account Fees
If you register as a limited company, you’re legally required to open a business bank account. There are many benefits to opening a business bank account. But a major downside is that banks tend to charge businesses monthly fees. Head here to read our complete guide to business bank accounts.
All limited companies must pay corporation tax, which is currently 19% of your annual company profits. Head here to read our complete guide to corporation tax.
Your business needs insurance. If you employ anyone, you have a legal obligation to get employer’s liability insurance. Some clients may refuse to work with you if you don’t have professional indemnity insurance. Limited companies ought to get directors insurance, to protect the decision-makers. The specific insurance cover you’ll need will depend on the nature of your business. But one thing’s for sure: You cannot do without it.
Are You Ready to Register as a Limited Company?
On paper, registering as a limited company is straightforward and inexpensive. But as we’ve seen, there are so many arrangements you’ll have to make, and so many additional costs, that registering as a limited company is only something you should do when you’re absolutely ready. The good news is that, if you are ready to register as a limited company, it’s a sure sign that things are going well for your business!
One aspect of registering as a limited company that needn’t be complicated is insurance. At Tapoly, we offer comprehensive insurance packages that will give you the tailored cover you need at a price you can afford. Head here to get a quote in minutes.