Introduction:
Are you thinking of setting up a limited company in the UK? If so, you’re probably wondering how much it will cost. The answer is not as straightforward as you might think. In this article, we will explore the various costs involved in setting up a limited company in the UK and provide tips for keeping your expenses down.
What is a limited company?
A limited company is a separate legal entity from its owners and shareholders. It is formed by registering the business with Companies House and can have unlimited liability. This means that if the company owes debts, the owners’ personal assets are not at risk. Limited companies are commonly used in the UK because of their liability protection.
Cost of registration:
The cost of registering a limited company with Companies House is £12. It includes the filing fee and certificate of incorporation. If you want to expedite the process, you can pay an additional fee for same-day delivery.
Annual compliance fees:
Once your company is registered, it must comply with various legal requirements every year. These include submitting annual accounts, paying corporation tax, and updating its details on Companies House. The cost of these fees varies depending on the size of your company and other factors. For example, if your company has a turnover of up to £150,000 and profits of up to £30,000, you will need to pay an annual compliance fee of £27.
Legal fees:
If you are setting up a limited company on your own, you will not require any legal services. However, if you hire a lawyer or accountant, their fees will depend on the level of assistance they provide. On average, legal fees for setting up a limited company range from £500 to £2,000.
Other costs:
There are several other costs involved in setting up and running a limited company in the UK. These include:
- Business premises – You will need to lease or purchase office space for your business. The cost of this will depend on the size and location of your business.
- Equipment and supplies – Depending on the type of business you are setting up, you may need to purchase equipment and supplies. This could include computers, software, furniture, and other office essentials.
- Salaries and benefits – If you have employees, you will need to pay their salaries and provide any necessary benefits such as pensions and health insurance.
- Marketing and advertising – To attract customers, you will need to spend money on marketing and advertising your business. This could include social media campaigns, advertising in industry publications, or attending trade shows.
Case study:
Let’s take a look at the experience of XYZ IT company, which recently set up as a limited company in the UK. They paid £12 to register their company and then spent an additional £500 on legal fees to ensure everything was done correctly. The annual compliance fee for their company, which has a turnover of £200,000 and profits of £50,000, is £63. In addition to this, they leased office space for £1,000 per month and purchased the necessary equipment and supplies for £5,000. They also hired three employees with salaries of £25,000 each. They spent £5,000 on marketing and advertising and saw a return on their investment after just six months.
Summary:
Setting up a limited company in the UK can be an expensive process, but it is worth the cost for the liability protection it provides. By understanding the various costs involved, you can budget accordingly and make informed decisions about your business. With proper planning and research, you can keep your expenses down and set your IT company up for success.