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How much to charge to incorporate a company?

How much to charge to incorporate a company?

I am an ACA accountant with a practising certificate. 

I have been asked by a colleague of my husband if I can advise him in incorporating his company. 

He is currently operating as a sole trader and wants to set up a company. 

I have no idea how much to quote to incorporate a company? I do book-keeping for another client and know that they were charged £450 by their accountants, but this seems like a lot to me...or is this the usual fee? I can't find any info on the internet so any advice would be gratefully received! 

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By neileg
22nd Mar 2012 12:57

To do what?

You can form a company at Companies House for £18. What other services were you going to offer?

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froth
03rd Apr 2012 10:43

Its not as simple as that........

I have formed many companies for clients and it is never as simple as just forming the Company. I tend to package it up along with remuneration strategy, formation of a PAYE scheme, maybe a VAT registration or transfer if necessary, and the completeion of all relevant statutory registers etc. There is also advice concerning the opening of a bank account and specific advice on the differences between extract funds from a sole trader to a Ltd Company. Very few clients understand the concept that you can only extract what you have retained after tax as they are used to drawing whatever they like whenever they like from a sole trader. For this complete service I charge around £500 plus VAT.    

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22nd Mar 2012 13:01

How much to wash a car or to extract a tooth?

There is no right answer. Here are two videos you may help helpful.

http://www.youtube.com/watch?v=HNAmZPgcBzU

http://www.youtube.com/watch?v=fB9c2ocJOx4

Bob Harper

Crunchers Accounting Franchise

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22nd Mar 2012 14:06

There is a right answer

£250 + VAT

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By cherryj
wblewis
22nd Mar 2012 14:10

Thanks for that - can I ask where you got that figure from? And what would that include - general advice & completing & submitting the forms for incorporation?

Thank you

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By cherryj
22nd Mar 2012 14:06

Helpful, :/

I know it's £18 to register at Companies House.
However, for someone who has very little financial/business knowledge, completing the forms, the memorandum & articles of association, can be daunting and he requires advice regarding setting up the company, I will complete the forms and registration and advise him on what he needs to do now he is operating as a company rather than a sole trader.

The invoice that charged £450 simply stated " Advice and incorporation of company" - therefore I wondered if this was an average fee for an accountant to incorporate a company.

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By neileg
22nd Mar 2012 14:23

I'm puzzled

Presumably your advice will be tailored to the circumstances of the client and as a result won't be a standard package. I think you should think in terms of value pricing - how much is your advice worth to your client. Or in other words I wouldn't look to find a market price for company formation and advice.

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22nd Mar 2012 14:27

As you have said you are also providing advice.  Firstly whether LTD is the right route, setting up a payroll, suggesting a dividend policy changing VAT details.  It really depends on what the client wants.  You could just send them a web link and let them do it themselves but do not undervalue your knowledge.

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22nd Mar 2012 14:35

Client may well need lots of advice

If you think of all the changes the client will have to make re suppliers, insurance, letterhead, payroll, dividends etc etc and the advice you will have to give to them it could take an extra hour or 10, depending on the ability of the client to be proactive or their requirement to have their bottom wiped.

You've really got to spend a bit of time at least on the phone to the prospect finding out some more info re client and his abilities/attitude/requirements before giving a quote you might later bitterly regret.

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22nd Mar 2012 16:45

£200 + VAT

And not a penny less

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By newmoon
22nd Mar 2012 16:48

Some are doing it for free!

I hear that some accountants, particularly dealing with contractors and freelancers, are not charging separately for the company formation, providing the company signs up to a minimum period as accountants, payroll bureau etc.

I'm not necessarily suggesting you do that, but that you look at the market you are operating in and the type of clients you are wanting to attract.

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By Hansa
22nd Mar 2012 17:53

Around £200 formation, + time & ancilliary services extra

I think Pottedbeef is about right - £200 to estabish a permanent file/form the company.

+ £150 ish for the RO if provided

+ £150 ish for CoSec (or Co Sec functions) if provided

... We're at £500 now.

Time should (I believe) always be charged (I give the first hour free but put the clock on after that at least for meetings and advice letters even if sent by email). 

Of course if you're trying to generate low margin, high volume business (eg contractors) you may choose to (per newmoon's comment) establish an all-in monthly fee to include the company formation.

As others have said you have to consider what you are offering... knowledge, experience, information compared to that of your client(s).  Some will want a barebones company and no help from yourself - £200 will cover your time/inconvenience ... Others want everything done for them - Then £500 for the year + time is fair.

PS I wouldn't bother forming yourself - far easier to use Formations Direct or someone similar (No I'm not on commission, just used them in the past with no problems - they've been around for years).  Good luck!

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22nd Mar 2012 21:11

Rip off
Amazing what some consider a 'reasonable' fee.
Simple company form 1/2 directors £120.
If they need vat registration and PAYE scheme, say £50 more.

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23rd Mar 2012 07:59

Helping the client

If this was a new business and I was just forming the company, and nothing else, I would be quite happy with £50-£100.

However, many clients need a lot of our time, lots of hand holding, and advice, especially if they are changing from sole trader, so £100 would be totally inadequate. 

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By blok
23rd Mar 2012 09:19

.

firstly, the terminolgy would be incorporating a business, not incorporating a company.

you might think that is pedantic but by using the wrong terminolgy it suggest to me that the only value added service you will be providing is the form filing.  for that service the charge is minimal.

will you consider:

Capital Allowances.

Final period trading results.

Share structure.

Goodwill.

Projections / Remuneration strategy

Funding / HP contracts and lease considerations.

Company car or not ?

The list goes on.

If you havent considered these things then the cost is £18.

If you have to consider these things then there is no right or wrong answer.

 

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TheLambtonWorm
28th Mar 2012 11:29

The perfect answer imo 

Blok has the perfect answer imo.

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23rd Mar 2012 13:16

Do not miss th epoint here. One aspect is forming the company the other is providing added value advise on how to proceed and operate a company.

 

 

 

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23rd Mar 2012 13:41

Cheap?

Our fees for incorporations vary widely, dependant on what the client needs.

In this case, you seem to simply be offering a company formation rather than actually incorporating the business into the new company. Have you considered cessation accounts, goodwill calcs, remuneration planning, VAT TOGC etc etc that will be needed? 

I charge a minimum of £200 + VAT just for a company formation. The incorporation of the business into the company is where I charge real fees, which have been in excess of £2k and are usually based on the tax benefits to the client. 

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23rd Mar 2012 14:29

If it is just company formation

then you cant compete with the specialised online formation agents.  When I set mine up, the agent charged me £18, and as long as I opened a bank account through Barclays (who i banked with anyway) then I would get a £50 cashback from Barclays!  Net cost to form the company -£32!.

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25th Mar 2012 11:41

I wouldn't ask others for their price to determine mine, because the way the whole process is handled can be substantially different.

For example, I recently incorporated a sole trader and the fee was £900 and for this I did the following:

Advised on the pros and cons of operating through a company, in particular the fact that you can't use the company bank as your own, increased regulation and accountancy fees, how tax is paid, etc

Advised on the best share structure and what the current position is regarding settlements legislation

Provided template letters to send to suppliers and customers advising of the change

Produced a repor showing the tax savings they would generate by becoming limited

Completed the incorporation, and provided them with all the inormation they need to open a new bank account

Produced an action plan for what they need to do now - close down old business, collect debts in, pay suppliers etc

Set up PAYE scheme and advised on remuneration

Completed and submitted vat registration and advised on most suitable scheme including calculations to show savings for recommended sheme

Provided training on book-keeping for wife

Plus supplying them with a guide to show what needs to be included on stationery, minutes etc

I would have charged £1,200 for this but the client was a nice chap who would get great benefit from this, and also was a bit short of cash - and we will make an extr £400 a year now he is incorporated through payroll, extra compliance etc.

The client was absolutely delighted with all of this and thought it was worth more than £3k to him - so everyone was happy

I could have charged him £150 and set up a company and left him to it - but we all know that the problems this causes for all parties are massive. I could of course have done everything above for £150 but why would I - my net fee after the incorporation costs would be about £90 for 8 hours work!

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25th Mar 2012 18:28

First Class Advice from DBowler

I did most of this fantastic list of things for a client recently and charged about £150 extra.

I was gutted later as I realised I should have charged much more. The only person to blame is me and just by presenting the client with this sort of list of what needs to be done would help most of the sensible clients realise that it is worth paying upfront to get the benefits of lower taxes later.

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25th Mar 2012 18:33

... it completely depends on what the service is...

... as everyone has said... what other valuable services are you going to deliver apart from just incorporating the business.

I know companies that have successfully charged £000's for incorporating a business - and with happy clients to boot...

... to say things like '£250 is the right answer' is, in my opinion, ridiculous.

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25th Mar 2012 22:20

Fair points

Ok, so £120 for company formation is, in my opinion reasonable, but as others have pointed out if you do more you then merely forming the company, you should be charging extra for it.

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28th Mar 2012 10:48

Company incorporation

Good morning, we are a UK formation agent, established for nearly 10 years. We offer company incorporations from £20.

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JAADAMS
28th Mar 2012 10:59

Just what did they get for their money?

THe client must have thought is was value.I dont think that it is expensive.  I have heard of accountants charging £1000 plus VAT.

We are all business to make a profit.

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28th Mar 2012 10:56

what does the fee include?

The fee for setting up the company might include a whole range of other things, for example getting it VAT registered, setting up the PAYE scheme, setting up a share structure. It may be a lot more than just the £18 at Companies House

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28th Mar 2012 10:57

It depends

If its a new company and no trading history then around £150-250 +VAT is about right.

However, if you are looking at converting a sole trader/partnership to limited company there are a whole host of other issues to consider. 

We charge based on tax savings over a 3-5 year period, agreed upfront with the client. Therefore our incorporation fees range from £1,500 to nearly £10,000.

But of course if you're not comfortable with that then stick with £250 or so.

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By janmc71
TheLambtonWorm
28th Mar 2012 14:51

Think about the value to the client

PUREaccountants wrote:

If its a new company and no trading history then around £150-250 +VAT is about right.

However, if you are looking at converting a sole trader/partnership to limited company there are a whole host of other issues to consider. 

We charge based on tax savings over a 3-5 year period, agreed upfront with the client. Therefore our incorporation fees range from £1,500 to nearly £10,000.

But of course if you're not comfortable with that then stick with £250 or so.

 

I totally agree with this reply!  Your fee should reflect the amount of tax savings and tax free cash you can generate for your client by incorporating the business - not just for doing the compliance bit. Otherwise, in my opinion, you are in danger of doing your clients a dis-service.

 

 

 

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TheLambtonWorm
28th Mar 2012 15:23

Something oft overlooked with value pricing

PUREaccountants wrote:

If its a new company and no trading history then around £150-250 +VAT is about right.

However, if you are looking at converting a sole trader/partnership to limited company there are a whole host of other issues to consider. 

We charge based on tax savings over a 3-5 year period, agreed upfront with the client. Therefore our incorporation fees range from £1,500 to nearly £10,000.

But of course if you're not comfortable with that then stick with £250 or so.

One point I would make about value pricing, is that if some firm is willing and capable to do all of that for say £250 (and some are), isnt that the value to the client, as that is what they could get it done for elsewhere?

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28th Mar 2012 10:58

Company incorporation

Interesting to view this incorporation debate, in parallel to another elsewhere on AccountingWeb http://www.accountingweb.co.uk/article/company-formations-arguments-getting-involved/525858  

http://www.accountingweb.co.uk/article/company-formations-arguments-getting-involved/525858 

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28th Mar 2012 11:02

Co formations

On the basis I'm getting a new client, from whom I will start easrning fees by standing order immediately, I usually charge £250 or £300 + VAT for formation. If they need it also includes general advice, VAT and PAYE registration. With the latter two items if I do it I know it's been done properly and that in itself saves a lot of time later on. I also include FRS application if necessary.

If the client is from a good source they pay the smaller amount, if not the higher one. I know of West End firms of solicitors who charge upwards of £1k plus the disbursements of formation. Maybe we're all in the wrong business!

 

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By pjc55
28th Mar 2012 11:26

Transfer of business

Another thing to consider (apologies if I've missed someone already saying it above!) is that he's effectively selling his soletrader business to the company, so there may well be Goodwill to calculate and account for.  This can then lead to a healthy amount owed to the director in the new company for him to draw against ("tax-free" in his eyes).  OK, there'll perhaps be a bit of CGT, but hopefully only at 10%.  

This is all part of the follow-on of incorporation and should be properly remunerated.  You may be able to justify quite a substantial fee (hence perhaps the higher fees mentioned above)  based on the tax-saving over the next few years of having transferred into the company.  The original £18 is only the tip of a large iceberg.

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28th Mar 2012 11:26

your liability

i think pottedbeef and hansa are nearer the mark, you have to remember as soon as you get involved your professional indemnity kicks in, you are then obliged to cover your insurance premium and cover yourself in compliance for PI/ ID fraud/money laundering and all the rest as well as the handholding advice, you need to charge a reasonable fee,

we explain this to clients and tell them they could do it considerably cheaper themselves, if they feel competent to do so.

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28th Mar 2012 11:34

Hourly charge

I may be very old fashioned but I have an hourly charge which I charge to all clients so non gets treated any more or less favourably than others!

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28th Mar 2012 12:04

Is that good?

@Doug- is that good, treating everyone the same? That's what Karl Marx recommended wasn't it?

Bob Harper

Crunchers Accounting Franchise

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28th Mar 2012 12:26

I would think the £450

I would think the £450 includes the firm fee and the firm my have outsourced the service. AA1 company Ltd charges around £70 and they do a good service where they send you Memorandum and articles of Association booklets that looks professional. Doing it directly with Companies House has a dilemma of getting a Model Memorandum and Articles of Association in which some articles are not the best. I rather go professional so we charge around £150 that includes the firm fee and also the outsourcing fee.

 

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28th Mar 2012 12:30

350

and you get

 

a new co

2 directors appointed

2 shareholders appointed

set up of registered office

co registered for co. tax

co registered for paye

co registereed for vat

co registered on flat rate scheme

90 minutes of time explaining how a co works

a covering letter going over this and pointing out a few things eg cis etc

an information pamphlet highlighting how it all works

a spreadsheet and instructions so you can do your own vat returns/ bookkeeping

and recommend them to HSBC as they give you £50 for each new client

 

Thast what we do...its not just about the company ;o)

 

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28th Mar 2012 12:51

£150 plus VAT...

...for a one or two person company, including all liaison with HMRC, ie VAT registration, setting up PAYE, CT41G. If client doesnt need VAT and/or PAYE they still pay the same.

 

Advice about the choice of vehicle, remuneration policy, stationery, banking, responsibilities of directors, etc etc has usually gone before the incorporation and is generally absorbed into the annual fee we'll collect by monthly standing order once the company is set up.

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28th Mar 2012 14:16

How much?

I'm sure the £450 was mainly for advice. To set up a company we charge £60 or £75 for the same day service and do all the registering with HMRC for all services for free. All advice is in effect free as well. I'm beginning to think we should re-think our fees.

You must be paying a lot for your prac cert, have you not done this before?

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28th Mar 2012 14:39

Three points not addressed explicitly above

1 - Does anyone either advise on or consider the tax status of their fee for incorporating the business? Do you conisder it tax deductible if billed to the sole trader or if billed to the new company?

2 - Does anyone's advice include tax cashflow planning for the old sole trader business? Thinking about the optimum time to incorporate and advising the client to ensure there will be funds to cover the final tax liabilities (after taking account of any available overlap relief)?

3 - @Dougscott - I disagree with your suggestion that an hourly charge ensures that no one gets treated any more or less favourably than others. I tend to think that most accountants get better (and thus faster) as they become more experienced.

Let's assume that you created a spreadsheet to help explain all of the comparisons, tax savings and projections for client A's incorporation last week. You also wrote or spoke to them and advised them on all of the salient issues - some of which you first researched to remind yourself eg: how overlap relief works, the impact of tax credits, the availability of ER etc etc.

Let's also assume you billed client A for the ten hours of your time this all took. Now client B appears and wants pretty similar advice. You already have the uptodate spreadsheets and knowledge so it only takes you 7 hours to deal with this client. How is it FAIR to client A for you to charge client B a lower fee simply because it took you less time?

Mark

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28th Mar 2012 14:48

£2000

I once saaw a lawyer charge £2k and all he did was set it up...we had to do the other stuff...

Does make you realise the clients are sometimes naive

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28th Mar 2012 14:49

Dumping

@Mark - no, you dump three hours to client B that you spent on client C because their books were a mess and you know you can't recover all the time.

Bob Harper

Crunchers Accounting Franchise

 

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28th Mar 2012 14:50

Lawyers

@Tom - I bet they had a record of the time.

Bob Harper

Crunchers

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28th Mar 2012 15:31

... the record?

I believe the record is £29,700 for an incorporation, but I may be wrong... and yes, the client paid it - it wasn't me, alas!

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Smalltalk
02nd Apr 2012 16:46

Yes

jaybee661 wrote:

I believe the record is £29,700 for an incorporation, but I may be wrong... and yes, the client paid it - it wasn't me, alas!

 

I know of an AVN member who got that level of fee for an incorporation, wasn't me though, and it did include a lot of work on agreeing a big goodwill valuation with HMRC I believe.

 

We use the AVN model and never charge less than £250 + VAT and that is reserved for brand new start up incorporations. If we incorporate an existing business its always higher.

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28th Mar 2012 15:36

No

@zarathustra - the £250 is the alternative cost, not the value.

In simplistic terms the value could be the tax saving of say £20,000. The client's profit, with an accountant who charges £2,000, is £18,000. The client's profit with a firm who charges £250 is £19,750.

Yes, this is 10% higher but is it worth the risk and hassle of changing?

I always include cheaper options in a proposal and address the choice upfront. If a client went with a cheap option and saved (in this example) £1,750 I could always offer to manage and check the work for £450 plus VAT.

Bob Harper

Crunchers Accounting Franchise

 

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28th Mar 2012 16:25

Most do it for free, or if not online it costs £4.50

Most accountants in the contracting industry include incorporation for free when taking a client on. Or, if the person wants they could use one of the many automated websites that offer the service for under a tenner. The most recent one I came across was £4.50 via Go Limited - https://golimited.co.

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28th Mar 2012 16:25

Most do it for free, or if not online it costs £4.50

Most accountants in the contracting industry include incorporation for free when taking a client on. Or, if the person wants they could use one of the many automated websites that offer the service for under a tenner. The most recent one I came across was £4.50 via Go Limited - https://golimited.co.

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28th Mar 2012 16:25

Most do it for free, or if not online it costs £4.50

Most accountants in the contracting industry include incorporation for free when taking a client on. Or, if the person wants they could use one of the many automated websites that offer the service for under a tenner. The most recent one I came across was £4.50 via Go Limited - https://golimited.co.

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28th Mar 2012 21:40

Value not cost

Well I've missed a trick here.

I've just tended to form a company and give some general advice. I need to take on board a lot of great comments made and offer/do a bit more.

 

 

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