Contracting through your own Limited company is the most tax efficient way of working meaning that you can take home more of your hard earned money, any accountant or tax expert will tell you this. But isn’t it a lot of hassle managing your own Limited company? Well we won’t lie, using an umbrella company is the simplest option. However, you might be surprised at just how little extra work there actually is managing your own Limited company. Other than sending a few cheques here and there to HM Revenue and Customs (your RMI tax expert will help you understand how much to pay), sending out invoices, and filling in a spreadsheet there really isn’t that much more. Contractor clients say to us it typically takes them about 15 minutes a month. The financial rewards for owning and working through your own limited company compared with using an umbrella Company could be substantial, as much as £15,000 per year more on a daily rate of £350.
How do I form my Limited company?
Once you’ve made the decision to contract under your own Limited company, the next step is to form your company. The whole process only takes 5 minutes on our website, following which your company will be formed within approximately 3 hours (during normal work hours). All you need is a company name and a credit card to complete the transaction. Once you have formed a Limited company, you will receive all the necessary Limited company documentation, along with an application for free business banking, VAT and PAYE registration details. During the on-line formation process you will be asked for several pieces of information:
This is you. The Director controls invoicing, the company bank account and decides on how much to pay themselves, which is made up of a combination of salary and dividends.
Following a change in legislations, as of 6 April 2008 there is no requirement for a company secretary You will need to allocate shares in the company.
Dividends are distributed to the shareholder(s) of the company, which is how you will take most of your income.
To check if your required company name is available, or to form your Limited company online click here
We can also advise you on registered offices - you may be registered at home or a formal business address however RMI offer a service through which we deal with all your business mail leaving you free to run your business!
How much does it cost?
Forming your company costs £95 + VAT on our website, which is one of the lowest fully inclusive prices available. You can of course find cheaper prices on the Internet but they rarely include everything you need, such as VAT and PAYE registration, each of which can cost as much as £75 from other accountants. Plus, cheap online formations often don’t provide any telephone support, so if you do get stuck who is going to help you? We have even seen offers of free company formations, which on first sight seem like great offers. It's only when you read the small print that you actually find out that if you accept the free formation you must remain a client for a minimum of a year or even longer, meaning the so called free formation ends up costing you thousands. Forming through RMI will give you peace of mind as you can call our Client Liaison Team directly who will be more than happy to assist you. You can of course form your company anywhere; you don’t need to form on our site to become a client. Forming your company online through us covers the complete company formation service with all legal requirements so that you can start trading as a Limited company. This includes:
- Helping to organise a Company Bank Account
- Registering the Company for VAT and PAYE
- Advice on the optimum share structure of your Company
And, company formations may be claimed back as an expense.
Choosing a Limited Company Name
Trading through your own limited company means that it is a legal requirement to register a company name, it also helps give your service ‘identity’ which people will recognise. Your company name could be as simple as just your own name, or of course there are a million and one other options. Even if you don’t then immediately start operating as a business. As soon as you do start trading and building up a client base and a good reputation, all of a sudden that name, or ‘brand’ becomes worth something and it’s even more important that it’s protected – and also that it is as unique as possible.
Choosing the name
This sounds like it should be easy! In fact, if you’ve been thinking and dreaming about setting up your own business for years, you may already have a name in mind that you’ve always wanted to use. But in reality there are many factors to consider before making a final decision. The first of these, of course, is whether the name is available – as no two businesses can have the same legal name. You should also ensure that it is not similar to a word or phrase which has already been registered as a trade mark, so there's no point in choosing Moca Cola or IBBM computing. You will need to search for existing company names that are the same or similar, and you can do this using the National Business Register.
Descriptive or abstract?
This is a really important decision that you have to make. Large organisations have spent literally millions of pounds when choosing or changing names, and the ‘brand development’ agencies which carry out these projects can spend weeks, if not months, deliberating on the right approach for an individual business. Your job should be far simpler, but this is still a vital one to decide upon. A ‘descriptive’ name makes it immediately obvious what your company does. For example, ‘IT Contractors Limited’ or ‘Smith’s Software Developer Consultant Limited’. But these names can be cumbersome and hard to remember, as well as being far more likely to be already registered – or at least similar to another company that is already registered. The alternative therefore, and something which has become far more popular in recent years, is to go for an abstract name which means nothing - and then to develop a ‘brand’ around it, so that people eventually associate your company, and what it does, with that name. At the top end, organisations spend millions going through this process. Take telecoms giant Avaya for example. They changed their name from Lucent Technologies which, although not 100% obvious in itself, at least told people that it was a technology company. When it rebranded as Avaya, part of that decision was to spend an awful lot of money carrying out what is known as ‘brand awareness’ advertising, so that people eventually knew what it did just by seeing the name – a marketing programme which included sponsoring the 2006 World Cup! Back in the real world however, no small business has that kind of budget, or expertise – and so a great alternative is to add a strap-line to your logo which tells everyone what you do. Even Avaya did this, adding the word ‘Communications’ under the name for the first few months. This gives you the opportunity to choose a nice abstract name which is also memorable (and even more importantly ‘dot' commable) and then just explain what you do underneath! The name you choose could be a totally made up word, or it could be an existing word but one which is not related to your business. For example, back in the late 90s, Scottish Telecom rebranded as ‘Thus’ – a name which is now pretty well known and associated with that business. Either option is fine, as long as you can find a name that you like and that, ideally, you can just add .com and .co.uk to, to form your catchy and memorable domain name.
Foreign and ‘PC’ sensitivities
When selecting a name, you also need to consider any other sensitivities which might cause a negative impact. Some people think that we live in a world where ‘Political Correctness’ has gone mad (who can forget ‘Baa Baa Rainbow Sheep?') – but even if you think it is all taken a bit too seriously, for the purposes of your company name, it’s best to err on the side of caution and to avoid any names which might offend someone. The other thing to consider, especially when choosing an abstract name, is that it might mean something else in a foreign language. Granted, you may never plan on trading in that country, but there could still be negative implications if the name you choose means something derogatory, contentious or just downright embarrassing in another language. One of the most famous, although in this case partly due to a slight mis-translation, was the name Coca Cola – which, when translated into Chinese, read ‘Bite the Wax Tadpole’. More simply - and not even due to translation, but just to different terminology - is the now-global brand of Australian sports shoe shops ‘The Athlete’s Foot’, which has some rather unpleasant connotations here in the UK.
Making sure your name is web friendly
As outlined above, any name you choose must be able to be used as a domain name. Having a website domain name that is different to your company name just causes confusion, and unless you are a huge brand, is best avoided. B&Q might get away with www.diy.com but that’s the exception. This is made slightly easier by the fact that you can have hyphens in your domain name, but remember that you will be saying either the web address, or your email address, over the phone many times - so you need to make sure it’s easily understood. A name with lots of hyphens between words can be quite hard to say. When thinking about your company name from a web perspective, it’s also worth thinking about how ‘SEO friendly’ the name is (Search Engine Optimisation - simply means how easy is it for Google/Bing/Yahoo to find it). If you do opt for a descriptive name, then you might find that people use that search phrase more generically when looking for the type of services that you provide – and that you might gain an advantage as they are in fact searching for your company name. Having said that, this should not be a deciding factor when choosing a name, as many other companies will probably use the same phrase as one of their ‘keywords’. One last thing to consider when choosing your name is that domain names are often written all as one word and, whilst you might know what it is meant to say, it could read quite differently to someone who’s never seen it before. One of the most well known examples of this is the well-known online technology forum for IT specialists Experts Exchange – whose web address is www.expertsexchange.com. Think about it . . .
At some point in the future you might want to consider applying for external investment into your business, and at this point you’ll need to come across as being very professional and businesslike. So think carefully now before choosing an outrageous, contentious or even slightly risqué name. Investors might not take you seriously and might be less than thrilled about handing over a cheque with such a bizarre name on it. If you are set on this approach then register a more ‘safe’ legal name and then operate using a more trendy one if you must. Many businesses go down the ‘trading as’ route, or simply use more memorable variation of their names as an outward facing brand. French Connection Limited’s FCUK brand is a classic example of this.
Registering your chosen name
Once you have chosen your company name and have determined that it is available, you can then register the name and set up your limited company. There are many organisations that can help you with this, including us of course. Have a look at top of the page for more information. Costs for this service are just £125, and it includes:
- Organising a company Bank Account.
- Registering the company for VAT & PAYE.
- Advising on the optimum share structure of the company.
- A complete company formation service with all legal requirements, so that you can start trading as a limited company.
If your chosen company name is available, we should be able to send out your certificate of incorporation within three hours of registration.
Good luck in your search and we hope you've found this short guide helpful.