Do I Need to Set up a Company to Build a Mobile App?

In today's digital age, having a mobile app for your business can feel less like a luxury and more like a necessity. One question we often get asked at Glance is whether our clients need to have a company set up to launch their mobile app. It's a significant decision, but don't worry—we’re here to walk you through the process. 

As business owners, we understand the weight this decision carries. On one hand, forming a company can offer protection and credibility. On the other, it’s an additional layer of complexity and cost. The good news? You're not alone on this path. Many have walked it before, and we've got their shared wisdom to help guide you. 

The secret of getting ahead is getting started.Mark Twain

In this article, we'll cover: 

• The benefits of forming a Ltd company
• How to Set Up a Ltd Company
• Alternatives to starting a company

By the end, we aim to leave you with a clear picture, so you can confidently decide what steps to take. Ready to dive in? Let’s get started!

Right, you might be thinking, "How is starting a Ltd company really going to help me, apart from giving me more paperwork?" Well, there's actually a fair bit to get excited about. 

Professionalism and Credibility 

First off, having a Ltd company gives you that extra layer of legitimacy. Clients and investors tend to take you more seriously when you have an official business structure. It's a bit like showing up to a business meeting in a sharp suit versus your cosy pyjamas. 

Legal Protection 

Then there's the issue of legal protection. As a sole trader, all your personal assets are on the line if something goes belly-up. With a Ltd company, your personal assets are separate from those of your business. So, your home and your precious collectibles are safe from business liabilities. 

Tax Benefits 

There can also be tax advantages. As a Ltd company, you're allowed to deduct a wider variety of business expenses before calculating your taxable income. Things like equipment, software subscriptions, and even travel expenses can be offset against your earnings. It’s like having a voucher for your everyday business purchases. 

Investment Opportunities 

Investors often prefer dealing with companies rather than individuals. By setting up a Ltd company, you open the door to potential investment opportunities. Plus, it’s easier to sell shares in a business than it is to transfer the goodwill of a sole trader operation. 

Brand Recognition and Trust 

Running your app development under a Ltd company can help with branding and marketing too. People find it easier to trust an established entity; think of it as setting up shop in a professional building instead of running a stall at a flea market. It gives you that extra clout. 

So, while starting a Ltd company might seem like a bit of a hassle, the benefits for your mobile app development project could far outweigh the initial effort.

Alright, your decision is made – you're setting up a Ltd company! But where do you start?!? Contrary to what you might think, the process is actually quite simple. Here's a clear, straightforward plan to get you going: 

1. Picking a Company Name: First things first, you need a name for your business. Try to choose a name that's unique and memorable, but also appropriate for your brand. A quick search on the Companies House website can tell you if your name is already taken or if it's uniquely yours.
2. Registered Address: Your company will need a registered office address – this is where official documents will be sent. It can be your home, an office or even a virtual address, but it must be located in the UK. We recommend using an address different from your home though, just to keep things separate.
3. Appointing Directors: Every Ltd company must have at least one director, who is legally responsible for running the company and making sure company accounts and reports are properly prepared. Don't worry, it's quite simple and you don't need any prior experience!
4. Issuing Shares: Next up, you’ll need to issue shares. Even if you’re the sole owner, you still have to issue at least one share which can be a nominal value, like £1. If you plan to have co-founders or investors, this is the stage to decide how many shares to allocate to whom.
5. Preparing Documents: Two important documents are the Memorandum of Association and the Articles of Association. The Memorandum of Association is a legal statement signed by initial shareholders (they agree to form the company). The Articles of Association are rules about how the company will be run.
6. Register with Companies House: Once all your documents are ready to go, it’s time to register your Ltd company with Companies House. You can do this online for a small fee. You’ll need to provide the details we’ve mentioned above, plus information about the people with significant control over the company (typically the major shareholders).
7. Register for Corporation Tax: Within three months of starting your business, you’ll need to register for Corporation Tax with HM Revenue & Customs (HMRC). This is important to avoid any penalties for late registration. 

And there you have it! Setting up a Ltd company might seem like a mountain at first, but by breaking it into manageable steps, you’ll be up and running in no time. If this sounds like a lot of work then you can always make the process even easier and use a company formation service to manage it for you. We recommend Companies Made Simple who will provide all the documentation you need as well as filing all the paperwork with Companies House on your behalf. They even have a registered office service which you can use.

So, you're not quite ready to jump into starting a whole new company? Fair enough. Let’s look at some alternatives that might suit you: becoming a Sole Trader or setting up a Partnership. 

As a Sole Trader, you can get your app idea off the ground without the formalities of setting up a company. It's possibly the simplest way to start. You manage everything yourself, which means you also keep all the profits. But, head’s up—this route comes with unlimited liability. If things go south, your personal assets (yes, even your beloved car) might be at risk. 

Registering as a sole trader in the UK is relatively straightforward. Here are the steps to get you started: 

1. Register with HMRC: You'll need to notify HM Revenue and Customs (HMRC) that you're self-employed. This can be done online through the HMRC website. Set aside some time for this as it involves creating a Government Gateway account.
2. Choose Your Business Name: You can operate under your own name or choose a business name. Just make sure it’s unique and doesn’t contain any sensitive words or expressions.
3. Keep Accurate Records: Make sure you keep detailed records of your income and expenses. This is vital for filing your annual Self-Assessment tax return.
4. Register for VAT (if applicable): If your turnover exceeds the VAT threshold (which is currently £85,000), you’ll need to register for VAT. Even if you don’t hit this threshold, you might want to register voluntarily to reclaim VAT on business expenses.
5. Insurance: Consider getting insurance to protect your business. Public liability insurance and professional indemnity insurance could save you from costly claims and legal fees.
6. File a Self-Assessment: Each year, file your Self-Assessment tax return to detail your earnings and expenses. You’ll pay income tax and National Insurance based on the profits you’ve made.

And there you have it! Setting up as a sole trader might not involve mountains of paperwork, but it does require diligence in keeping your financial ducks in a row. Good luck!

Then there's the Partnership option. It’s like being a Sole Trader, but instead of flying solo, you have one or more partners to share the load. This could be great if you have a friend or colleague who complements your skills. Like Batman and Robin, but in the business world. Just remember, everyone involved is equally responsible for any debt. So, choose your partners wisely! 

Setting up a Partnership in the UK is relatively straightforward. Here’s a quick walk-through: 

1. Choose Your Partners: First things first, select your partners wisely. Each partner will share responsibility for the business, including any debts.
2. Pick a Name: Decide on a business name. It can be your own names or a unique business name, just ensure it’s not offensively controversial or in use by another company.
3. Designate a ‘Nominated Partner’: One partner needs to be responsible for managing the partnership’s tax returns and keeping business records (like an admin superhero).
4. Register with HMRC: You’ll need to register the partnership with HM Revenue and Customs for tax purposes. This is where your Nominated Partner comes in handy.
5. Create a Partnership Agreement: While not legally required, it’s highly advisable to draft a partnership agreement. This sets out how the business will be run, the roles of each partner, and how any profits or losses will be shared.
6. Sort Out Insurances: Make sure you sort out any necessary insurances. This could include public liability insurance, employer’s liability insurance (if you have staff), and professional indemnity insurance.

And that’s it! You’re ready to delve into the world of business partnerships. Don't forget, a bit of legal advice can go a long way in ensuring smooth sailing.

Each option has its own pros and cons, so it boils down to your comfort level with risk and how much control you want to retain. No one-size-fits-all solution here. But guess what? You don’t have to make these decisions alone; at Glance, we can help you choose the best approach for your particular situation.