First-time founder FAQs 

Introduction

This guide provides clear, practical answers for anyone running a limited company for the first time in the UK. It explains how to manage ongoing tax responsibilities, handle company finances, maintain statutory records, pay yourself correctly, meet Companies House deadlines, work with co-founders, hire employees, manage cash flow, and avoid operational mistakes. Each FAQ offers concise, confidence-building guidance to help new founders run their business compliantly and effectively.

1. Money, tax, and banking

These FAQs focus on managing ongoing finances once your company is up and running.

FAQ 1: Do I need a business bank account as a first-time founder?

Yes. If you run a limited company, a business bank account is essential. It keeps your personal and company finances separate, ensures clean bookkeeping, and makes it easier to track cash flow and prepare accounts.

A proper business account also helps you monitor spending, manage tax planning more easily, and use features like expense categorisation and integrated accounting tools. These benefits become increasingly valuable as your company grows and financial activity increases.

1st Formations partners with eight major providers to offer you fast, flexible options that align with your business needs. You can explore these choices on our Business Banking page to find the most suitable account for your needs.

FAQ 2: When do I need to register for Corporation Tax?

You must register your company for Corporation Tax within three months of starting to trade. This deadline is based on when trading begins, not the date of incorporation. HMRC will expect you to keep accurate financial records, report annual profits, and pay any Corporation Tax due by your filing deadline.

Registering is straightforward. You can complete the process online via HMRC using your company’s Government Gateway account. However, it is vital that you understand these early responsibilities, and many founders choose to use an accountant to ensure the registration is completed correctly.

FAQ 3: Should my company register for VAT?

Registration becomes compulsory once your taxable turnover exceeds the annual VAT threshold of £90,000. However, many small companies choose to register voluntarily before reaching this level to reclaim VAT on their purchases, improve cash flow, or enhance their credibility with customers and suppliers.

Voluntary registration can be beneficial for B2B companies, but it may make your prices appear higher for consumers who cannot reclaim VAT. If you're unsure, many founders choose to speak with an accountant to determine the most tax-efficient approach.

Discover: 1st Formations VAT Registration Service

FAQ 4: How do I pay myself from a limited company?

Most founders pay themselves using a combination of two methods:

• Salary through PAYE – This is treated as a business expense and reduces your company’s taxable profit. You’ll need to register for PAYE and run payroll on a monthly basis.
• Dividends – These are paid from post-tax profits once the company has generated sufficient surplus. Dividends must be formally declared and recorded.

Many first-time founders opt for a modest salary plus dividends, which can be more tax-efficient depending on the profit levels.

Regardless of the method you choose, ensure that payments are properly documented. Keep payroll records, dividend vouchers, and board minutes to evidence how and when payments were authorised.

More guidance: How to pay myself from a limited company

FAQ 5: What financial records must my company keep?

You must retain:

• Invoices and receipts.
• Payroll records.
• Bank transactions.
• Expenses.
• VAT records (if applicable).
• Dividend documents.
• Director and shareholder decisions.

Accurate bookkeeping supports compliance, accounts preparation, and cash-flow planning. Well-maintained records make it easier to submit correct tax returns, understand your financial position, and spot potential issues before they escalate.

Many first-time founders use simple accounting software or monthly bookkeeping routines to stay organised and avoid falling behind.

FAQ 6: What is cash flow, and how can I manage it effectively?

Cash flow is the movement of money in and out of your company. To avoid cash shortages, first-time founders often:

• Create 3 to 6-month cash flow forecasts.
• Invoice promptly and set clear payment terms.
• Use accounting tools to track balances.
• Avoid overspending in early stages.

In the early stages, it’s beneficial to review your cash flow position frequently, ideally on a weekly basis, so you can identify issues before they become urgent.

Simple steps such as sending invoices promptly, following up on late payments, and avoiding unnecessary spending can make a significant difference. Many first-time founders also benefit from using accounting software.

FAQ 7: What expenses can my limited company claim?

Common allowable expenses include software subscriptions, laptops and office equipment, essential travel, marketing costs, and professional fees such as accounting or legal services.

To qualify, expenses must be wholly and exclusively for business purposes, meaning they directly support company activity rather than personal use. Keeping digital receipts, categorising expenses regularly, and using bookkeeping software will help you stay compliant and reduce your company’s taxable profit through legitimate deductions.

2. Co-founders, hiring, and teams

These FAQs support founders in making operational decisions related to shares, equity, responsibilities, and early hires.

FAQ 8: Should founder shares vest over time?

Vesting helps protect your company if a founder leaves early, ensuring that shares are earned gradually rather than granted upfront. A typical vesting schedule spans three to four years, often with a one-year “cliff”, meaning no shares vest until month 12. This structure encourages long-term commitment.

Vesting is especially valuable for first-time founders because it creates a fair framework for contribution over time. It reassures investors and helps maintain trust between co-founders by clearly defining expectations from the outset.

Many early-stage teams document vesting terms in a shareholders’ agreement to avoid misunderstandings and protect the company as it grows.

FAQ 9: When should I hire my first employee?

Most founders hire their first employee when they have:

• Consistent and repeatable demand for their product or service.
• A clearly defined role with responsibilities.
• Sufficient budget for salary, National Insurance, workplace pension contributions, and equipment.
• Compliance processes in place, including payroll and mandatory insurance.
• Clarity on whether the role must be an employee rather than a contractor.

Before hiring, you should also be prepared to run payroll every month, enrol eligible staff into a workplace pension, and obtain employers’ liability insurance, which is a legal requirement for almost all UK companies with employees. These steps help ensure a smooth and compliant hiring process from day one.

An employee handbook is also highly valuable at this stage. It sets clear expectations around working practices, behaviour, communication, holiday entitlement, IT usage, and grievance procedures.

FAQ 10: What HR basics should a first-time founder put in place?

At a minimum, you should implement:

• Employment contracts
• Company policies
• Payroll processes
• A method for tracking leave
• Health andsafety responsibilities

As your company grows, it becomes helpful to introduce more structured people processes. This may include formal onboarding steps for new starters, such as welcome checklists, equipment setup, and introductions to key tools and policies.

Over time, you can introduce regular performance reviews to discuss progress, goals, and development needs, as well as training plans.

FAQ 11: How should we divide responsibilities between co-founders?

A clear division of responsibilities avoids duplication, gaps, and confusion as the company grows. Many founding teams split responsibilities into defined areas such as operations, sales, marketing, product development, or finance, based on each person’s strengths and availability.

It’s also helpful to agree on who has final decision-making authority in each area to keep momentum and reduce friction. Documenting these decisions in early board minutes, a shareholders’ agreement, or a simple roles matrix creates clarity, prevents misunderstandings, and helps maintain accountability as hiring begins.

3. Funding and finance strategy

These FAQs focus on funding decisions once your business is in operation.

FAQ 12: How can first-time founders secure funding in the UK?

Funding options include:

• Personal savings or revenue
• Start Up Loans
• Angel investors
• Crowdfunding platforms
• Early-stage venture capital (typically requires traction)

Before seeking investment, it’s important to prepare clear evidence that your product or service has genuine demand. This may include early sales, customer feedback, waiting lists, pilot results, or usage metrics.

Investors will also expect realistic financial forecasts, covering projected revenue, costs, and cash flow, alongside clear messaging about your value proposition, target market, and growth plan.

FAQ 13: Do I need a pitch deck to raise investment?

Yes. A pitch deck is essential because it provides investors with a concise, structured overview of your business and its potential. It should clearly explain your market, solution, traction, team, financials, and forecasts.

Your deck does not need to be visually complex, as clarity and evidence matter most. Including concise data points, simple visuals, and a clear ask (i.e., how much you’re raising and why) helps investors quickly assess your opportunity.

FAQ 14: Should I raise investment before or after launching my product?

Most investors prefer to see evidence of traction before investing, even at early stages. This typically includes signals such as strong customer interest or early revenue.

Post-launch fundraising is usually easier because you can demonstrate demand, gather user feedback, and show that your product or service is gaining momentum.

Raising investment before launch is possible, but it’s far less common and usually limited to exceptional cases, for example, founders with a strong track record or a product requiring significant upfront development.

Many first-time founders choose to bootstrap in the early months to refine their idea, build an MVP, and validate assumptions before speaking to investors.

FAQ 15: What financial reports should I review regularly?

Useful early-stage reports include:

• Profit and loss (P&L)
• Cash flow statement
• Aged debtors/creditors
• Monthly management accounts

Reviewing these reports regularly helps you spot financial trends early, understand how your costs are changing, and identify areas where spending may need to be reduced or adjusted.

They also make it easier to monitor performance against your forecasts, anticipate cash flow issues, and make informed decisions about investment, hiring, or future spending.

4. Compliance, governance, and legal obligations

These FAQs highlight the operational requirements for staying compliant with HMRC and Companies House.

FAQ 16: What are my ongoing responsibilities as a company director?

Directors have many responsibilities, such as:

• Keeping accurate company records
• Filing a confirmation statement annually
• Submitting annual accounts
• Maintaining statutory registers
• Acting in the company’s best interests
• Keeping company details updated

Many first-time founders find it helpful to set up a simple annual compliance calendar or use accounting software with reminders to keep on top of these responsibilities.

Reviewing your records regularly and updating details promptly can help prevent penalties and reduce stress at year-end.

FAQ 17: What are statutory registers, and do I need them?

Yes. Every company must maintain registers for:

• Members
• Directors
• Directors’ residential addresses
• Persons with Significant Control (PSC)
• Secretaries
• Charges

Directors must ensure statutory registers are kept accurate and up to date, as failing to do so can lead to unlimited fines and compliance issues.

Storing registers electronically can also improve accessibility, making it easier to produce records during inspections or when requested by shareholders, accountants, or investors.

FAQ 18: What is a confirmation statement, and how often do I file it?

A confirmation statement updates Companies House on your company’s shareholders, SIC code, and structure. It must be filed every 12 months, even if there have been no changes.

You can file your confirmation statement directly through your Companies House online account. Still, many first-time founders prefer to use a company formation agent to ensure all details are correct and up to date.

1st Formations offers a Confirmation Statement Filing Service for £59.99, which includes the Companies House filing fee and ensures the submission is completed accurately and on time.

FAQ 19: What insurance does a limited company need?

Common policies include:

• Public liability insurance
• Professional indemnity insurance
• Employers’ liability insurance (mandatory if you hire staff)
• Cyber insurance

Insurance protects the business against unexpected risks and claims, helping to cover the financial impact of accidents, errors, legal disputes, or damage to property or data.

Having the right policies in place provides peace of mind, supports operational continuity, and ensures you meet your legal obligations, such as employers’ liability insurance if you hire staff.

5. Avoiding common founder mistakes

These FAQs identify the pitfalls that new founders encounter when running a company and provide guidance on how to avoid them.

FAQ 20: What mistakes do first-time founders usually make?

Common issues include:

• Not prioritising cash flow
• Unclear co-founder roles
• Neglecting compliance deadlines
• Overspending too early
• Hiring too soon

Many of these mistakes can be avoided by setting up simple systems early, such as weekly financial check-ins and reminders for key filing deadlines.

Taking a steady, organised approach in the early months often reduces stress and improves long-term decision-making for first-time founders.

FAQ 21: How do I avoid burnout as a founder?

Founders can reduce burnout and stress by setting clear boundaries, pacing growth, delegating tasks effectively, maintaining strong support networks, and taking regular structured downtime.

It also helps to create routines that separate work from personal time, regularly review your workload, and avoid taking on too many priorities at once. Speaking openly with co-founders or advisors about pressure points can provide a valuable perspective and help you address issues before they escalate.

Over time, developing sustainable working habits supports better decision-making and improves long-term resilience.

FAQ 22: How important is a business plan once the company is running?

A business plan remains highly valuable after your company starts trading. It helps you track progress, refine goals, plan staffing and costs, and support funding applications.

It also helps create operational consistency by giving you a clear framework for decision-making. Updating your plan as you learn more about your customers, market, and financial performance can highlight what’s working, what needs adjustment, and where to focus resources next.

Over time, the business plan becomes a living document that supports more informed, confident management of your company.

FAQ 23: What should I focus on in the first 90 days of running a company?

Many founders focus on:

• Organising finances and accounting tools
• Setting up payroll
• Reviewing compliance
• Speaking to customers
• Monitoring cash flow
• Documenting internal processes

Treat the first 90 days as a foundation-building period rather than a race to scale.

Small, consistent actions, such as reviewing your finances weekly, speaking regularly with customers, and documenting simple internal processes, can make your operations far smoother in the long run.

FAQ 24: How can I set up strong processes early?

Begin with simple workflows:

• Weekly financial check-ins
• Monthly reporting
• Structured team communication
• Onboarding documents
• Clear approval processes for spending

When setting up early processes, start simple and build gradually. Focus on creating routines that you can maintain consistently, rather than trying to implement complex systems from the start.

It often helps to map out your most frequent tasks, such as invoicing, customer follow-ups, or weekly reporting, and create small checklists to keep things organised.

FAQ 25: How do I know when to outsource tasks?

You should consider outsourcing when tasks become too specialised, time-consuming, or high-risk to manage effectively in-house.

Common areas include bookkeeping, payroll, HR, website maintenance, legal compliance, and IT support, all of which require accuracy and up-to-date knowledge. If these tasks start pulling you away from product development, sales, or strategic decisions, outsourcing can offer a cost-effective way to maintain quality without hiring full-time staff.

Outsourcing also helps first-time founders stay compliant with UK requirements, particularly in areas such as payroll, taxes, and employment law, where mistakes can result in penalties.

Running a limited company for the first time involves navigating a range of key areas, including tax, finance, compliance, team management, governance, and early operational challenges.

Explore the linked resources throughout this guide for additional support as you continue to operate and develop your business.