How to actually form a company
OK, onto my first post about how you actually start a company, instead of all the philosophical ramblings so far. (They may well continue too though!)
First of all, you may not need to form a company – you can just be a “sole trader”. It’s simple, but there are two problems – one of them is that there is no separation between the assets of the company and you, so if the company is sued or goes bust, you get sued or go bust.
Secondly, if you want contracts in the IT industry at least, you normally have to be a limited company, as people won’t do business with individuals.
A “limited company” (specifically, a company limited by shares) is therefore probably what you want. It’s an independent legal entity, able to enter deals, have bank accounts, etc. etc. You, as the person starting the company, will be a Director. (Possibly the only director). Directors have legal responsibility if it all goes belly-up.
To create a limited company, you apply to Companies House in Cardiff. You need such things as Articles of Association (effectively the constitution of the company) and to decide how the shares should be held. You can do this all yourself, and I understand it’s not impossibly complicated, but it’s more usual to get somebody else to do it for you.
The two possibilities there are your accountant, or to buy a ready-made company off the web. The former is more expensive (£300ish as opposed to £90ish) but you, of course, get a real human being to talk to.
All you really need is proof of ID, an address (to be your main place of business) and you can do it. But, the company has all sorts of obligations – not the least of which is filing its tax returns each year. Added to which, the Inland Revenue will decide that they want to send you (personally) a self-assessment tax return. So, typically, you’ll have to go from doing zero tax returns per year to two – three if you register for VAT.
The only other thing you’ll need is a Company Secretary. If you’ve got two or more directors, one of them can be secretary – but otherwise you’ll have to find somebody else. Somebody responsible. Somebody with experience of running a business. Somebody organised. Naturally, therefore, I chose my Mum. In practice the Secretary doesn’t have to do anything much, perhaps signing a form once every few months, but they do have some liability if the tax return isn’t filed on time.
The company formation takes a couple of days (any big accountant will be able to do it electronically) and you end up with a company number. Later you can use this to get bank accounts and so forth.