Spotlight on contracting: How to set up a limited company

Moving into the contracting world can be a huge step, there are plenty of questions you need to ask yourself before you make any decisions. In our latest blog series ‘Spotlight on contracting’ we aim to help you answer some of the questions.

In our previous blog we looked at the differences between umbrella and limited companies.

In this blog, we take a look at how you would set up a limited company.


If you have made the decision to set up a limited company, before you go through the process of setting it up you need to find out if you will be contracting under the IR35 regulations that come into force in April 2020.

If your contract does fall under IR35, you must be paid via an umbrella company.

Why choose a limited company

By working through your own limited company, you have full control of your revenue – you become the director of your own company. You will be responsible for your own timesheets, paperwork, tax and VAT returns.

How to set up a limited company

Setting up a limited company can be time consuming, for a fee you can save time and ensure everything is submitted correctly by using a company that will go through the process for you – always do your research before deciding on a company.

If you do want to do it yourself, you can follow these steps.

Choose a name

The first decision you need to make is the name of the company. You may want to go creative with this but it’s best to stay simple and generic. There are rules to what you can and can’t do when choosing a company name – check out this guide on the rules of choosing a name.

Once you have chosen a name you need to find out if it still available. You can do this on Companies House.

Who’s in charge

Once you have finalised your name you need to name the director of the company – this is most likely going to be you – you can also name a company secretary, but this is not mandatory. When naming the director, you will need to provide their name, address and occupation. You will have to give two types of address during the process:

  • Residential address – this is where each member of the company lives. It will not be displayed publicly.
  • Registered address – this is where the company is registered to. You can use your residential address, but it is displayed publicly so you might not want to do this due to privacy concerns. You can choose to put your accountants address or gain a “virtual” address.

A limited company is managed by its director but owned by its shareholders, therefore you will also need to name your shareholders and specify how the shares will be divided – as a director you can name yourself as the only shareholder to avoid handing over control.


There is some paperwork you need fill out to legally set up your limited company. The two important documents are a memorandum of association and an article of association:

Memorandum of association

This is a legal document signed by shareholders setting out why you’ve set up the company and how you plan to run it. This document is incredibly important because if there are any tax disputes and legal proceedings the courts will use this document.

If you are registering online it will be created automatically for you, however you may still wish to do it yourself as it is incredibly important. You can find templates online and your account may be able to help you.

You cannot update the memorandum once you have registered your limited company

Articles of association

This document outlines the rules the director, shareholders and company secretary have agreed on.

You can use a standard default article called a ‘model article’ or you can write your own when registering the company. Again, there are templates online for this document and your accountant may be able to help if you are writing it yourself.

Register Online

Once you have done all this you can then go online to Companies House to register your company. Once you have paid the incorporation fees the process will be completed and you will have set up a limited company. Companies House will also take you through all the steps needed to ensure you haven’t missed anything.

VAT & Tax

You should be able to register for corporation tax at the same as registering with Companies House, however if you cannot do this you will need to register separately with HMRC after you have registered your limited company.


Staying organised with your records is incredibly important, if there is a dispute with your tax HMRC will check your records, particularly:

  • Records about the company itself
  • Financial and accounting records

You can hire an accountant to help you with your records, but it is always good practice to keep them somewhere safe and have a filing system in order.

Working with a recruitment agency

Once you have set up your limited company you are responsible for your own timesheets. If you are contracting through a recruitment agency, they will deal with the payment side. At KDR, we pride ourselves on our contractor care – we want to make the process as smooth as possible for you.

“You’ve been excellent – never in my 18 years contracting have I experienced a more superior and efficient process than yours”- BI Consultant

Our contractor payment process:

  1. Submit your timesheet and limited company invoice to us – the timesheet must be signed by a line manger at the client’s side
  2. KDR will invoice the client directly
  3. The client will pay KDR directly
  4. We will pay you as per your timesheet and invoice

We ensure all our contractors get paid within 10 days of the invoice, therefore if the client is late at paying us you will still get paid.

“Very many thanks, this is the most positive experience I have had as a contractor” – Data Contractor

Moving into contracting can be daunting and setting up a limited company can be a long process, hopefully we have a been a helping hand in understanding how to set up a limited company when contracting – remember it’s always best to do your research and if you are unsure you can pay an expert to help you along the process. We found these links to be particularly helpful:




If you have further questions about contracting or are looking for your first contracting role, you can contact Declan or take a look at our latest roles here.

If you have decided an umbrella company is the best route for you, keep an eye out for our next blog about working with umbrella companies.

Missed the other blogs in our series? Check it out below:

How do I get paid?

Umbrella company vs limited company

KDR Recruitment is the home of the best data, technology and analytics jobs. For more career advice check out the KDR blog or follow KDR on LinkedIn.

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