First time contractor seeking help

[Blade]

Hi all,

since I am planning to start contracting (the company I was working for at my last permanent role has just shut down operations) I have recently registered a limited company online. I have done some reading, but I since I am totally new to these things I am still a bit confused about a few things:

- So I have registered the limited company and got the certificate etc. Now... what's next? Depending on which website I read it looks like I need to open a business bank first and then do the VAT registration, or the other way round. Which one is correct? Or should I get an accountant first?

- When I registered the company, I specified myself as the only share holder and when asked to specify the shares, I had no idea of what to enter so I left the default values (I think it was 1 share, 1 pound or something like that) since it said that I can change those values any time. What would you recommend I do about the shares?

- I have often read that it is advisable to get a pension as well as an insurance to cover myself from potential legal issues etc. I know nothing on both of these. Would you have a pension scheme/service and insurance for IT contractors to recommend?

- Since I haven't done contracting before, and while I would strongly prefer working with contracts for the (potentially) better money and possibility to save in taxes (but also to feel more like I work for myself in a way), I think there still is the possibility that, should find it hard to get a contract in a reasonable amount of time, I may have to revert to some permanent position at least temporary. This is absolutely not what I would prefer doing now (otherwise I wouldn't have registered an LTD), but I want to be prepared if this happens. So in this case, what would I have to do with my LTD? I wouldn't want to shut it down since I would still want to do contracting (unless I find a so well permanent job that justifies abandoning the idea of contracting), so could I leave the LTD opened but sort of inactive? Of course while I wouldn't want to lose/close the LTD I wouldn't want to pay any taxes etc either for the LTD while I am on a permanent role.

- This is related to the previous one. Is it possible at all to keep a limited company while I am in a permanent role, or isn't this legally allowed for some reason?

- Are any of you Ruby developers working as contractors? If yes, would you be so kind as to suggest what sort of rates I should be looking for? And possibly which websites/resources you would recommend to look for Ruby-related contracts. I have around 10 years of experience in web development and have worked for several years in the .NET department first, and then I have gradually switched to Ruby (and Rails, Sinatra, Linux and all the rest) over the past few years until I have completely abandoned .NET and Windows development in general time ago. So what rates should I be looking for?

Sorry if some of this questions may sound stupid or if you may have heard the same questions (I guess) zillions of times, but I am new to all of this as said and despite I've done some reading, I am still not 100% sure on how these things work.

Thanks a lot in advance

[Bluespider]

Hi and welcome.

Check the first timers link on the right >>>>>

Loads of good info there.

[SueEllen]

Hello

I'm going to be nice - part of being a contractor means finding all the things you listed out for yourself and then making your own decision. No one will hold your hand.

My first suggestion is find yourself an accountant.

My second suggestion is that forum has a wonderful search utility and I suggest you use it.

[Thejacka1]

Don't worry too much about the Company, that can be marked as dormant until you've got Money flowing through it.

Get a gig then worry about the admin afterwards, it's what most people do, it can be sorted out very quickly.

Good Luck!

[Old Greg]

Don't worry too much about the Company, that can be marked as dormant until you've got Money flowing through it.

Get a gig then worry about the admin afterwards, it's what most people do, it can be sorted out very quickly.

Good Luck!

WTJS

I got a contract offer on a Friday, phoned SJD and got them to set everything up for me to start on Monday. The SJD website has an excellent guide to running a Ltd - you need to register for free to download it.

[Wanderer]

- So I have registered the limited company and got the certificate etc. Now... what's next? Depending on which website I read it looks like I need to open a business bank first and then do the VAT registration, or the other way round. Which one is correct? Or should I get an accountant first?

Definitely consider getting some advice from a proper accountant. There are a few who post on this forum. You could also look at joining the PCG who can set you up with insurance etc and good advice.

Get a bank account straight away, they might take a little while to set up. People here seem to use Santander or Cater Allen but there are lots of banks out there of course. Don't go paying a monthly fee for your banking, you want a free (forever) one. Don't worry about the VAT just yet but you will have to register when your turnover hits a certain amount.

- When I registered the company, I specified myself as the only share holder and when asked to specify the shares, I had no idea of what to enter so I left the default values (I think it was 1 share, 1 pound or something like that) since it said that I can change those values any time. What would you recommend I do about the shares?

1 share of 1 pound is fine. If you have a spouse who doesn't work then you can give them a share too and split the dividends to avoid tax. Get professional advice before doing this though.

- I have often read that it is advisable to get a pension as well as an insurance to cover myself from potential legal issues etc. I know nothing on both of these. Would you have a pension scheme/service and insurance for IT contractors to recommend?

You don't legally need any insurance but some clients insist that you have Professional Indemnity and perhaps Public Liability. As a director of a one man company you don't need employer's liability insurance (unless you plan to sue yourself). Wait till you get a contract and see what insurance they require before you get it.

- This is related to the previous one. Is it possible at all to keep a limited company while I am in a permanent role, or isn't this legally allowed for some reason?

You can be a company director while working in a permie role. You just make the company dormant. You will still have to file accounts at the year end and company returns etc. Some permie employers won't let you run a business on the side as they will be concerned that it will conflict with your permie job.

So what rates should I be looking for?

Permie salary / 1000 = hourly contracting rate. So if you were taking £50k permie then you want 50/hour or 350-400/day. Look at jobserve et al and itjobswatch.

Sorry if some of this questions may sound stupid or if you may have heard the same questions (I guess) zillions of times, but I am new to all of this as said and despite I've done some reading, I am still not 100% sure on how these things work.

Ahh, your questions aren't that dumb. It's just that most of us here learnt the hard way and there isn't really any clear cut right way of doing things. Do some more reading of the links on the right though. Have a search for nixonwilliams, they have some good stuff on their website too.

Also find read up and understand IR35.

[Blade]

Hi all! and thanks a lot for your replies.

@Bluespider,

yes, I have read those pages before posting - that's where I learned about the limited company, VAT, accountancy etc etc in first place.
As said I was just a little confused and kind of wanted confirmation I had understood well what I've read (English isn't my mother tongue either and therefore things that may sound obvious to who has some experience and is mother tongue may not sound as obvious to somebody who is not mother tongue and has no experience with these things)

@SueEllen,

thank you for being nice. Same as above: I read at least 20-30 discussions on the forums before posting. And you know what is the funny thing? It's that in most of those discussions there were several replies like yours. E.g. "search is your friend".

Besides this, I haven't asked anybody to hold my hand or to make decisions on my behalf. All I asked is some advice. I think it's quite different, isn't it?

Don't worry too much about the Company, that can be marked as dormant until you've got Money flowing through it.

Get a gig then worry about the admin afterwards, it's what most people do, it can be sorted out very quickly.

Good Luck!

Wondeful, I've read something about marking the LTD as "dormant" but I had read on some other website that I would have to shut down the company instead if I were to start a permanent job, "for legal reasons". Which sounded very weird to me in first place.

WTJS

I got a contract offer on a Friday, phoned SJD and got them to set everything up for me to start on Monday. The SJD website has an excellent guide to running a Ltd - you need to register for free to download it.

That sounds quick! I was hoping I could postpone the accountant as well as any other kind of costs until I secure a contract first, so that makes me happy.
SJD is the accountancy firm I was thinking about since I've seen it mentioned in many discussions both on these forums and on other websites.
Thanks for the tip on the guide, I visited their website but hadn't noticed about it; I will register and download it ASAP.

Definitely consider getting some advice from a proper accountant. There are a few who post on this forum. You could also look at joining the PCG who can set you up with insurance etc and good advice.

Thanks A LOT for taking the time to reply point to point!
I am sure I've read about this "PCG" already but can't remember what it is. Just to be sure are you talking about Home | PCG on freelancing?
I will do some reading on their website.

Get a bank account straight away, they might take a little while to set up. People here seem to use Santander or Cater Allen but there are lots of banks out there of course. Don't go paying a monthly fee for your banking, you want a free (forever) one. Don't worry about the VAT just yet but you will have to register when your turnover hits a certain amount.

Just arranged an appointment for tomorrow with HSBC, since I already have a personal account with them. I asked them a few questions in chat through their website and I was told they will open a totally free account for me even after the 18 months they usually advertise. They also told me the account will be opened right away when I go there in the morning.

As for the VAT, do I gather this is something not really urgent then? From my reading I was of the impression that I would have needed to do this before starting work with the limited company? Am I mistaken on this then?

I've read also about the "flat rate", is this what is usually recommended?

1 share of 1 pound is fine. If you have a spouse who doesn't work then you can give them a share too and split the dividends to avoid tax. Get professional advice before doing this though.

Cool, I will, glad to hear anyway that I haven't made any massive mistake with the shares
I know just nothing of all this stuff...

You don't legally need any insurance but some clients insist that you have Professional Indemnity and perhaps Public Liability. As a director of a one man company you don't need employer's liability insurance (unless you plan to sue yourself). Wait till you get a contract and see what insurance they require before you get it.

Note taken. And I will read more on the PCG insurance options you mentioned.

You can be a company director while working in a permie role. You just make the company dormant. You will still have to file accounts at the year end and company returns etc. Some permie employers won't let you run a business on the side as they will be concerned that it will conflict with your permie job.

Perfect

Permie salary / 1000 = hourly contracting rate. So if you were taking £50k permie then you want 50/hour or 350-400/day. Look at jobserve et al and itjobswatch.

LOL, simple and sounds like the equation makes sense for the results

Ahh, your questions aren't that dumb. It's just that most of us here learnt the hard way and there isn't really any clear cut right way of doing things. Do some more reading of the links on the right though. Have a search for nixonwilliams, they have some good stuff on their website too.

Also find read up and understand IR35.

Thank you, I really appreciate your availability and the time you took to answer. I was about to add questions on the IR35 to the original post but then I thought already that I had to read some more about it. I will check out nixonwilliams too. Thanks!

[Wanderer]

Wondeful, I've read something about marking the LTD as "dormant" but I had read on some other website that I would have to shut down the company instead if I were to start a permanent job, "for legal reasons". Which sounded very weird to me in first place.

The only reason not to have a company while permie is that your employer tells you "You can't work for us and be a company director too". There is no legal impediment that I know of.

Yes, the Home | PCG is correct.

As for the VAT, do I gather this is something not really urgent then? From my reading I was of the impression that I would have needed to do this before starting work with the limited company?

You don't have to register unless you turnover ~£70k in your first few months. The information on this website is accurate and generally good advice. Go back to the right side of the page, read all about "VAT" and "IR35". If it's not clear then you should get a specialist contractor accountant engaged and have a good old chat with them to get to grips with it. Good luck!

[krytonsheep]

I have gradually switched to Ruby and Rails ...

That's a good choice:-)

So what rates should I be looking for?

You could look here.

[Fred Bloggs]

Nobody has mentioned flat rate VAT. It is in your interests to register for this as soon as you start trading. In a nutshell, you charge VAt at 20% but you pay HMRC 15% (depends on your type of business the exact %, mine is 15%). So you automatically gain 5% of your turnover for nothing. Plus for the first year, you get an extra 1% bonus. Also ask the accountant about cash accounting for VAT. That helps with your turnover when you are paying your VAT since you pay over the VAT on monies received instead of monies invoiced.