Will your new contractor accountant charge to form a limited company?

Posted Nov 1, 2011

Most accountants can set up a limited company on your behalf, either for free if you're appointing them as your accountant, or for a fixed fee. How much can you expect to pay for this initial service?

Methods of company formation

There are three ways to set up a limited company:

1. Pay a formations agent to do this on your behalf. You can pay from as little as £30 for a very basic service (with all paperwork delivered electronically), to £100 and beyond. Try Duport for an established formations service.

2. Do it yourself via Companies House. This costs £18 for the electronic service (and £40 for the paper service). You will need to fill in the application form, and submit supplementary documents yourself.

3. Your accountant will be able to form a company on your behalf for a fee, or for free if you sign up to their accountancy service.

Why do some accountants charge to set up a company?

Your prospective accountant will either absorb your company formation costs into its ongoing monthly fee, or apply a one-off charge for the service. This can vary wildly between firms, from £50 to over £200. So, why pay for this service?

The answer is that your accountant will do a lot more than simply set up your company via Companies House in return for this initial set up fee.

In addition to the incorporation itself, you will need to register your new company for Corporation Tax, Value Added Tax, and appoint your accountant to deal with HMRC on your behalf.

The accountant will also need to advise you on how to structure the company's share capital, appoint directors (and possibly a company secretary), and guide you on the most tax efficient way to set up shareholdings.

Lastly, some contractors will already have a live limited company, or will have formed one in advance of appointing an accountant.

Some accountants prefer to charge a one off fee to set up a new company, as to include this service in the regular monthly fees could penalise those contractors who already have an established company.

Ultimately, the set up costs charged by accountants should be just one factor you consider when choosing an accountant.

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