Setting up a Limited Company.
 
For ‘Professional Athletes’ who profit from their sport (or those that plan to in the future), a Limited Company provides a tax efficient vehicle for current and future earnings.  This page discusses the benefits of a limited company, and takes you through some of the commonly asked questions.   


Choose a section below to read more:

What is a limited company?
What do you need to get started?
Setting up the company
Memorandum of Association
Help from Granite Morgan Smith
The Bank Account
Registering for VAT
Start-Up Expenses
What do I have to do when the business is up and running?
Contact Us


What is a Limited Company?
The Limited Company is a separate legal entity as far as the tax and the legal system is concerned. This means that it has its own identity, and does business under its own name. It makes or loses money, can acquire debt, and pay taxes all by itself, just like a physical person.
Understanding this is important because it explains why the legal formation of a limited company works the way it does.  Just as a baby is registered in the birth rolls when it is born, a company is registered in the official list of companies when you start it. This list is kept by Companies House.

Back to top


What do you need to get started?
The hardest part, but probably the most important part is to pick a company name.  In general most athletes pick a name associated with them eg: Sebastian Coe Limited, but you can choose any name you like, providing that someone else has not already registered it.
The next step is to decide who is going to be part of it.  Again, most athletes own and operate the company themselves, however, you could be involved with a spouse or other family members.  This is a difficult area that needs to be considered carefully. Speak to a professional advisor about this before you form the company.
Once you have chosen who is in the company, the Shareholders (probably just you) get issued shares, which entitle them to a proportional share of the profits of the company.

Back to top


Setting up the company
Once you've made all the decisions above, you can then arrange to get the company formed.   This can be done easily and cheaply online, although many of the cheaper options, simply register the name for you and leave you to sort out all the paperwork.  This can cause serious problems further down the line.  Our advice is to get a professional to set up the company for you.  It is often more efficient and for the extra few hundred pounds, the job gets done properly.
Online or through a professional, you will need to appoint a company director.  This is generally you, but could be someone else that you trust

Back to top


Memorandum of Association
You will also need to file a Memorandum of Association with Companies House. This is a document that tells everyone why you've set up the company, and how you plan to run it. This document can have significant legal importance in tax disputes and any legal proceedings.  You can write this document yourself, but once again if you use a professional accountant, such as Granite Morgan Smith, then this is all included in the company set-up fee.

Back to top



Help from Granite Morgan Smith or another Accountant
If you choose an accountant to set up your company, you get a bit more at the slightly higher cost. Our fees are generally £350 for the whole set-up process. This includes everything to get you up and running: setting up the limited company, VAT registration, bank account referral, corporate tax registration.
We can also go on to handle your payroll and taxes. This is the route of least resistance, and of course we provide ongoing  useful advice for your growing company.

Back to top


The Bank Account
Getting a business bank account can be more difficult than you might think. The High Street banks can be suspicious of new companies, and they will worry you about your credit rating. If at all possible, try and work with a bank where you already have an account and are known. A referral from an accountant or a company formation specialist can spare you some pain in this regard, although the banks have their own processes, and there is always a fair amount of bureaucracy involved, whichever bank you choose.

Back to top


Registering for VAT
Companies that turnover (sell) more than a certain amount are required to register and account for VAT. This is the last but by no means the least step in starting your company. You can register online at the HMRC website and in general, handling VAT online is much easier than going the paper route. You may experience a delay in receiving your VAT registration, but don't worry as you can backbill your clients for it (just tell them you intend to do this). Some accountants will handle your VAT for you, but you can make the calculations yourself easily with the help of the online forms.  
As with all of these steps, please just ask for help if you need it.

Back to top


Start-Up Expenses
Any start up expenses when setting the company up can be claimed against future revenues.

Back to top


What do I have to do when the business is up and running?
Having chosen an accountant and set up your limited company you will now need to consider the on going requirements and obligations to run your company. Whilst running a company is not much different to keeping your own personal finances in order, with a company you can’t let your paperwork slip and there are several deadlines that need to be met.  Some particular areas that you need to think about are:

1. Contracts
The tax legislation prevents individuals simply forming a company a charging an employer for their services, because a company gives many more options to minimize tax.  There are therefore tax rules (IR35 being the most famous) which you will need to consider when you start trading with someone.
You will need to ensure that any contracts that you have for income via the company should be in the company name and not you own name.
You may need to seek specialist professional advice for the various contracts you undertake in order to ensure that your decision is valid and will stand up to the scrutiny of an HMRC inspection.

2. Invoicing
You will need to invoice your agent, sponsor or the competition organisers each week or month, or a frequently as you provide the service.

3. Recording Transactions
You will need a system in place to record all of the company transactions: Payments, Invoices, Expenses. A simple spreadsheet (download an example here)will suffice although the method used will usually be determined by the accountant you select.

4. Payroll Matters
As company director you normally take a salary from the company whether or not you are working under IR35. You will need to arrange for payslips to be prepared and ensure that the necessary taxes are paid over in due time.

Most accountants include a full payroll service as part of their package to contractors, which will avoid the need for you to be involved in the detailed calculations.

Following the end of the tax year, it will also be necessary to file an employers annual return (form P35), together with forms P14, P60 and P11D if you have taken any expenses or benefits in kind from the company during the year. Your accountant would normally deal with these so that your involvement is simply approving the documents before they are submitted to HMRC.

5. Dividend Planning
If you are working outside the scope of IR35 then the bulk of your income from the company will be taken by way of dividends. It is vital that the necessary documents (board minutes and dividend counterfoils) are prepared at the time you take each dividend.

Profound problems can arise if the necessary procedures are not adhered to in this area. In addition you will need to ensure that your dividend drawings are not in excess of the company’s profits after corporation tax. Your accountant will be able to advise on a sensible amount to withdraw.

6. Accounts
The company will need to submit accounts to the Inspector of Taxes and Companies House once per year. Penalties arise for late filing and it is important that you ensure that the documents are prepared in due time. Your accountant will normally prepare these for you which you then approve for forwarding.

7. Company Secretarial Matters
Companies House will issue a company annual return once every year which you will need to complete and forward to Companies House, together with their annual fee of £15. Various other forms will have to be submitted to Companies House if the circumstances of the directors or company change, e.g. you move home, change company secretary, etc.

8. Personal Tax Return
As a company director it will usually be necessary for you to file a personal tax return under self-assessment. Your accountant can prepare this for you.  It is usually an additional cost and if you are a member of the BAC then you will be entitled to discounts on this service.

9. VAT Return
If your company revenue is more than VAT registration threshold then you will be required to register your company for VAT. You then add an extra 17.5% to you invoices. You can also claim the VAT back against purchases you make that incur VAT. Every three months you must complete a VAT return and send a cheque to HMRC for the balance of VAT left over after purchases.

Back to top


Contact Us
So, lots to think about. And hence why so many athletes put their faith in Granite Morgan Smith to undertake most of this work for them.  Please contact us to get the process underway. Tel: 01376 574848.

Back to top