Open a company bank account
It will be necessary to open a bank account in the limited company name. The reason for this is that it is a separate legal entity and therefore needs to have its money accounted for separately. The choice of banks is not important – they all offer similar deals with generally 12 or 18 months free banking, and possibly reduce charges thereafter. You should ensure that all money received from contract work etc is paid into your company bank account and if you wish to withdraw money from that account in the form of dividends, these must be paid directly to yourself. What you specifically must not do is to make payments to third parties through the limited company bank account unless they relate to the company expenditure itself i.e. you should not write limited company cheques for personal expenditure.
Get your company stationery
If a limited company communicates with anyone, in any formal way whatsoever, then it must state on that communication the full name of the company, its registered number, its place of registration and the registered office address. This applies not only to letters and purchase orders but also to emails and websites.
We would expect you to keep records using Excel spreadsheets or similar. You basically will need to maintain four spreadsheets showing sales invoices issued to your customers, monies paid into the bank account, monies paid from the bank account and expenses. Once we act for you, we will send you model spreadsheets showing the sort of records which you will need.
As banks will make significant bank charges to their customers after the first year, we recommend that as many expenses as possible be paid privately and you should simply draw a cheque to reimburse yourself for expenses. In this respect, having your own limited company is very similar to working for someone else’s company where you would normally expect to complete an expenses claim supported by expense vouchers which would then be paid. Both the Inland Revenue and HM Customs and Excise will expect to see expense vouchers to cover the vast majority of expenses. We would point out that specifically, round sum expenses are not allowed.
Unless you run an exceptionally energy efficient car, it is generally not a good idea to have your car owned by the company. The reason for this is despite the fact that you will own the company yourself, the company car is taxed as a benefit in kind and you also have to pay National Insurance on this as well. The amount will depend on the price of the car and the engine emissions but except for very small engined and energy efficient cars, it is unlikely to make a company car worthwhile. What instead you should do is to simply charge mileage to your company at a rate of 40p per mile for the first 10,000 miles in the tax year and 25p per mile thereafter. This is designed to cover the full running costs of the car including fuel, maintenance, road tax and insurance. The only additional charges which may be claimed are road tolls and car parking. A log of your business miles should be maintained as the Inland Revenue may ask to see this as evidence of your mileage claimed.
When first opening a bank account, your bank adviser may well tell you that you require Public Liability and Employers Liability insurance. In fact, you will not need either of these since you will not have your own business premises nor will you be employing staff.