Starting a limited company? Avoid these costly mistakes (and how an accountant can save you time and money)

Starting your own limited company is thrilling, but don't let the excitement overshadow the importance of getting the basics right. Even small errors can have big consequences down the road. ​

In this guide, we’re going to talk about the common mistakes to avoid when starting a limited company in the UK, and how an accountant can save you time and money.​

A limited company is one of the most common business structures in the UK - it separates from its shareholders, owners, and directors. This means a limited company has its own rights and responsibilities, and the shareholders are not personally responsible for the company’s debts and liabilities beyond their investment in the company. ​

Limited companies can offer tax advantages, increased credibility, and easier access to funding, making them a popular choice for businesses of all sizes. However, they also involve more administrative work and compliance requirements compared with other structures like sole traders. If you’re interested in this topic, we have a more in-depth guide on the advantages and disadvantages of limited companies. ​

There are 4 types of limited companies:​

If you’re unsure about which type of limited company to choose, it’s best to consult your accountant. Or talk to Beany if you are not working with an accountant. ​

Read more: What's a company limited by shares vs company limited by guarantee?​

Let’s make sure you start your limited company on the right foot - from getting the right share structure and knowing all your tax obligations, to getting professional help.​

Imagine your company is a pie. Share structure is how you slice that pie and decide who gets which pieces. It might seem easy. But how you divide those slices can have a huge impact on your business now and in the future - such as how much control you have, how profits are shared, and how easy is it to get investment in the future.​

Many new business owners make mistakes with their share structure. They’re not clear about different types of shares, who has voting rights, and how dividends are paid out. Talk to an accountant and ask them to create a share structure that works for you so you can avoid problems down the road.​

When starting your limited company, tax can be complicated. Failing to understand what taxes you need to pay and when you pay may lead to missed deadlines, penalties and unnecessary stress.​

In the UK, the common limited company taxes are VAT, corporation tax, and PAYE. If you’re unsure about what they are, always consult with an accountant to ensure you're meeting all your obligations. Also, mark key tax deadlines in your calendar and set reminders to avoid missing crucial filing dates.​

Picking the right Standard Industrial Classification (SIC) code might seem like a minor detail, but it's important when you start your limited company in the UK. Think of it as a quick way to tell the government what your business is all about. Here's the thing: your SIC code can impact things like your insurance premiums and whether you qualify for certain support programs. ​

Choosing a code that's too broad or doesn't match your core business activity can create some unexpected headaches down the line. That's where an accountant steps in - they’re experts at navigating the ins and outs of SIC codes and can help you find the perfect match, saving you the potential hassle and making sure you're getting all the allowances you're entitled to.​

It’s easy to assume a newly formed non-trading company doesn’t need to file anything. Yes, it’s true that you don’t need to file your corporation tax yet, but you still need to keep HMRC in the loop about your non-trading status. Companies House also requires annual accounts from all limited companies, regardless of whether they're actively trading. In some instances, a dormant set of accounts may be suitable. While it might seem like a pointless exercise to fill in "0" on most lines, it's a legal requirement to avoid penalties and potential removal from the register. You can choose to file a dormant account on HMRC’s website or let your accountant handle everything.​

One of the common mistakes when starting a limited company is not having your finances in good order. For example, you may be mixing your personal and business finances, losing track of receipts, and relying on spreadsheets. ​

Accurate and organised books are the backbone of a successful business. This isn't just about staying compliant with HMRC; it's about having a clear picture of your company's financial health. Without proper bookkeeping, you're essentially flying blind, unable to track profitability, identify areas for improvement, or make informed decisions about the future.  Read more on bookkeeping basics every business owners should know.​

An accountant can help you establish efficient bookkeeping systems and ensure you’re meeting the legal requirements. ​

Get your business off to a flying start with Beany's Starter Pack.  We'll take care of the tricky stuff like company formation and tax registrations, and support you with Xero setup and training, and financial planning and forecasting, all for one affordable and fixed-monthly price.​

Read more: Do I need a business bank account?​

Running a limited company without a budget is like setting sail without a map or a destination in mind. You might enjoy your ride for a while, but it is easy to get off-track without a proper budget that can highlight issues before they become too large to address. A budget is basically a forecast of how your business is expected to perform financially. It helps you secure funding, make smart spending choices, and track your progress along the way. Without one, you're relying on guesswork and hoping for the best. ​

Luckily, accountants are pros at creating realistic financial forecasts, tracking those all-important numbers, and helping you make data-driven decisions. Get in touch with one of our team to see how we can help. ​

It's tempting to think you can handle all your accounting and tax yourself, especially when you're starting out and every penny counts. You might be confident with numbers or have some basic bookkeeping knowledge. But beware – this seemingly cost-saving approach can quickly turn into a costly mistake. 
Without an accountant, you may find yourself overwhelmed by constantly changing tax rules, regulations, and deadlines. This can lead to filing tax returns incorrectly, miscalculating taxes, missing out on valuable reliefs, allowances, and deductions, and wasting hours trying to figure out unfamiliar accounting software. An accountant is your strategic partner, they’re more than a number cruncher. We have a blog on finding the right accountant for your small business.​

Read more: 7 ways a small business accountant can save money for your business​

While setting up a limited company alone is possible, an accountant is your co-pilot for a smoother journey. Their expertise can save you time, money, and headaches, letting you focus on what you do best: building your business. ​

Beany offers a Starter Pack that helps you stay ahead of the curve when starting your limited company. With a range of services covering essential early-stage business needs including incorporation, financial forecasts, tax registrations and planning, and Xero support, you’re setting yourself up for business success in the long run. Book a call with one of our team members or sign up today. ​