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What is a limited company

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What is a limited company

What is a limited company?

Starting your own company is a big step, as this requires more of a commitment from you given the number of statutory and financial obligations you have to fulfill. Nonetheless, contracting through any other employment model might cause you to pay more tax than working through your own limited company.

So, congratulations! You have chosen the most “tax-efficient” way of contracting.

According to HMRC’s definition: ‘A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances.’

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits amongst its directors and shareholders.


Moving from umbrella to limited

Many contractors start off working through an umbrella company or are paid via PAYE by the agency they work through and then move on to form a company of their own due to the numerous benefits offered such as potential tax savings, increased status with clients and limited personal and legal risks.

If you have decided to make the switch and take control of your company affairs, look no further: Bradleys Contractors can help. The transition process is easy and quick.

The first step is to ensure you fulfill all your commitments regarding your existing contractual assignments with the umbrella company and your agency and then inform your umbrella company that you no longer need their services.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits amongst its directors and shareholders.


Requirements to set up a limited company

MLR Due Diligence

The next obvious step is to set the wheels in motion and form your company which – by the way – is not difficult and can be done within 24 hours. Once you decide to set up a company, we will ask you for the Money Laundering Requirement (MLR) documents:

For the contractor
1 photo ID – passport or driving license
1 proof of address – something like a utility bill (which is not more than 3 months old)
Company formation

After the MLR activity is complete, you are required to fill up the Company Formation (CF) form and send it back to Bradleys. Based on the information received, we create the company on the Company House (CH) login. The company information is received by us within 24 hours.

Sending TOB

We then prepare a Terms of Business (TOB) in the name of your company based on the agreed fees and services – which you are required to sign via DocuSign. The process is completed once Bradleys receives the signed document from you, after which you will be emailed the company formation details.

For more details, please refer to point 2.2. in our Limited Company Guide.

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