There are several ways to set up your own limited company; via an accountant (a popular way), via a company formations agent, or direct with Companies House. Here we look at the typical costs associated with each option.
As you can imagine, the more “middlemen” that are involved, the more you can expect to pay. Having said that, contrary to popular belief, it is surprisingly inexpensive and easy to set up a company.
Your company formation options
a) Incorporate directly via Companies House
The standard registration fee to set up a company is just £12 for the ‘standard’ Companies House web incorporation service, which takes up to 24 hours to turnaround. You can pay via credit card, debit card or PayPal.
You will be charged £40 if you submit a paper application using Form IN01 (subject to an 8-10 day turnaround). For a same-day formation (paper return), you’ll need to pay £100, although all same-day Companies House services have been temporarily suspended due to the Coronavirus outbreak.
Using the web incorporation service, you will need to fill in several online forms that together make up Form IN01 (including company director details, the company’s registered address, the company’s proposed share capital, and shareholder details).
All applicants are automatically provided with the Companies House model Articles and Association (essentially a company ‘rule book’), and the Memorandum of Association is automatically created (stating that each subscriber wishes to form a company).
b) Use a formations agent
Another route is to use an intermediary to incorporate on your behalf. There are hundreds of formation services available online, from email-only services (i.e. all your company documents will be emailed to you) to more extravagant packages which even include a brass plate with your company name on it.
You will typically find that most formations agents make their money by offering additional add-ons, such as setting up business bank accounts, as it is hard to make a margin on the incorporation itself.
You simply need to search if your desired name is available, pay the fee, and everything should be taken care of on your behalf.
The leading formations company is 1st Formations – you can set up a company from £12.99 here.
c) Ask an accountant to form your company
A large number of contractors prefer to set up a company via their accountants as this is a hassle-free process, and for those unfamiliar with running a business, this makes a lot of sense.
For many, the idea of becoming a company director is fairly daunting, and a specialist accountant will be able to answer any questions relating to directors’ responsibilities, and to the formation itself.
If you’re considering issuing several classes of shares, have multiple shareholders, or need advice on how best to split your new company’s shares, then using an accountant is a prudent move – for obvious reasons.
In many cases, your accountant may even include the incorporation costs if you sign up for their monthly service.
Other accountants will apply a one-off set up charge rather than absorbing the costs into the standard fee.
Either way, your accountant should let you know upfront how much your company incorporation will cost.
Visit our directory of contractor accountants for an initial list of service providers.
What about the ongoing costs of running a company?
Despite the preconceptions some prospective company directors may have, the ongoing costs of running a company are very low from an ‘official’ point of view. The only ongoing statutory cost is the £13 fee for submitting your Confirmation Statement.
Putting trade-related expenses aside (buying a new PC, or printing costs, for example), the only additional costs associated with administering the company itself are usually accountancy fees, and possibly some additional professional costs. These will clearly vary according to the service provider you choose.
There are a number of steps you need to take when setting up a company – read 10 things you should know before forming a company.
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