Setting up a limited company for contracting

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  1. Home
  2. Knowledge Base
  3. Starting a business
  4. Setting up a limited company for contracting

More and more people are choosing to go it alone and set up as a contractor. And why not? Contracting has considerable benefits: greater flexibility, higher pay and the ability to work with new clients, for starters.


With many companies still reluctant to hire full-time employees, many people see setting up a limited company for contracting as a way of increasing their revenue and their job satisfaction at the same time.


We’re seeing it in all sorts of different industries, from construction to web design, and everything in between. But making the decision to become a contractor is just the beginning. Once you’ve made that decision, it’s time to ask yourself if it’s worth setting up a limited company to work under.


Why do it?


There are many benefits to setting up a limited company when contracting. Here are a few:

  • Flexibility: You can manage your business, however – and from wherever – you want.
  • Tax: If your income goes up, you may find yourself pushed into a higher tax bracket. Forming a limited company allows you to pay yourself a salary at a lower tax bracket and make up the rest of your income through dividends. These are charged at a lower tax rate than personal income.
  • Limited liability: The good thing about being a limited company is that it limits the extent of your liability. You will be protected personally in case the company runs up debts or slips into liquidation. Equally, if there are any legal claims brought against you these will be levied against the company rather than you yourself.
  • A professional image: Being a limited company presents a more professional image to potential clients. Whether suppliers, customers or potential investors, we instinctively trust a company rather than an individual.


Getting started


So, how do you go about setting up a limited company for contracting? The good news is it’s much easier than you might think. Indeed, you can have the application sorted in as little as ten minutes.


To do this you will need to choose a name. In an ideal world, you may want to operate under your own name, especially if you have built up a good reputation as a contractor. However, if another company has already taken this name, it might not always be possible. Try searching for the name you’d like to operate under to see if it’s available before you get started.


You’ll also need a company director and at least one shareholder. If you’re moving from contracting you can perform both roles.


Setting up a limited company as a contractor couldn’t be simpler or more affordable. We can advise on the best time to make the change and everything that’s required of you for legal purposes. Just check out our special contractors’ package, or continue browsing the help centre.

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