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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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Formation bundles



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  • £9.99
  • E-Formation

  • Set up a basic Limited Company that’s ready to trade and choose anything else you need as extra.
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  • £19.99
  • Essential

  • An easy way to set up a company that’s ready to trade. Plus, your official printed certificates.
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  • £59.99
  • Entrepreneur

  • Your official certificates & company register. Plus, a registered business address, FREE for 3 months.
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  • £99.99
  • Super

  • Your official documents, and confirmation statement. Plus, a registered business address, FREE for a year.
  • £29.99
  • Starter

  • The hassle and risk-free option for getting started and growing your limited company.
  • £79.99
  • Essentials

  • Starter plus a comprehensive SME legal documents and credit score build & monitor service.
  • £149.99
  • Pro

  • Essentials plus a 24/7 legal advice helpline, and your home address privacy secured.

Knowledge hub

Ready to have your company set up?
Registering a company might seem an intimidating process, but it’s actually much simpler than you think: especially in the hands of seasoned company formation agents like us. We’ll not only help you with registering a company, but offer a range of services to support your business at all stages of its life. We’ll help you sort out your company registrations online, with a process so quick and easy you can go ahead and focus on the fun bits.
What is a company formation agent?

Formation agents perform company registrations in partnership with Companies House. We’re one of the largest, and also the cheapest. We don’t just get your company registered then leave you to it – we use our experience to help you start your business properly. There are plenty of reasons to use a formation agent rather than go directly to Companies House. If you ask us, though, the best thing is that we go through the whole process with you, and get your application submitted securely online. We provide expert advice on the legal hurdles while you incorporate, and recommend good quality solutions that you might need after you’ve formed.

What’s the difference between sole trader and limited company?

Think of it this way: when you form a limited company, you put a protective shield between you and your business. Being a sole trader is the opposite – you have no protection. As a sole trader, you are responsible for any debt you might come into while you’re in business. When you register and become the director of your own limited company, you have less personal responsibility. The benefits are that you can claim back expenses, and add to your salary with dividend payments at the end of the year. For more information, see our Help Centre article about limited companies and sole traders.

How do I register a company?

Easy, we’ll do it for you. Check out our formation bundles to learn more about our different products. They start at £9.99, and go all the way up to our Super bundle. Limited company formation is a straightforward business if you’re as well-versed with the process as we are. If you’re not sure where to start, check out our company formation guides for an introduction and some insider tips.

Why The Formations Company?

We’re dedicated to British business, and love nothing more than seeing new companies flourish. 750,000 UK companies have trusted us to help them register, and we have thousands of happy customers who’ve seen how simple the formations process can be. We’re cheaper than going to Companies House directly, and cost less than most accountants. Our online application is incredibly simple, and if you’ve got all your documents handy it shouldn’t take more than 10 minutes to complete. So what are you waiting for? Start your business today.

Learn more about starting a business