Contractors thinking of going into business for the first time may be daunted by the thought of forming a limited company. However, in reality, the company formation process is not complex.
There are three ways of setting up a new company for your contracting work: by using the Companies House web filing service directly, by using a formations agent, or via your own accountant.
In all three cases, the same documentation is processed via Companies House. Which route you take will depend on the costs of each option, and how much time you are willing to dedicate to forming the company yourself.
A formations agent will charge anything up to £100 to form a company on your behalf, and contractor accountants charge different amounts (from ‘free’ – if you sign up to their monthly services, or up to a few hundred pounds in some cases).
Which documents must be sent to Companies House?
To form a new company, three documents must be submitted to Companies House.
This the formal application form, which includes your registered office address, details of all company officers (directors/company secretary if needed), details of share capital and classes of shares issued.
Before you fill in this form, you must first check that your desired company name is available, and that is doesn’t fall foul of the rules governing ‘sensitive’ words or expressions.
The Memorandum of Association
Contains the names and signatures of all subscribers to the new business. It also records the intentions of each subscriber to take at least one share in the new limited company.
The Articles of Association
A document which acts as the ‘constitution’ for the new company. It covers how the company is to be run. Since 1st October 2009, new ‘model’ articles were introduced as part of the Companies Act 2006 roll out. These model articles are used as standard unless you wish to provide your own Articles.
You can download all the relevant documents, including Model Articles, from the Companies House site.
The Company Formation process
If you are forming the company yourself, you can now complete this online, direct with Companies House for a mere £15, using the link above. In this case, you submit all your formation details online and use model articles.
You can incorporate using paper forms, which costs £40 (8-10 day turnaround), or £100 for a same-day formation (see here).
Alternatively, a company formations agent or accountant can set up the company on your behalf.