When and How to Incorporate Your Restaurant Business
Running a café, restaurant, or takeaway is hard work. You’re juggling long hours, staff, suppliers, and customers – and probably don’t have much spare time to think about company structures. But if you’re growing, or planning to, how you set up your business can make a real difference.
If you’ve been wondering whether you should incorporate your restaurant – or if it’s even worth the hassle, here’s what you need to know.
Why Incorporate?
If you’re currently operating as a sole trader, you are the business. There’s no legal separation between your personal assets and your business liabilities. If something goes wrong – a customer claim, a supplier dispute – your personal savings, your home, even your car could be at risk.
Setting up a limited company creates a legal divide. The business becomes its own entity, responsible for its own debts and obligations. Your personal risk is generally limited to the amount you invest in the business, giving you a bit more peace of mind.
Other benefits of incorporating include:
- Tax efficiency: Limited companies often pay corporation tax, which can work out cheaper than income tax once profits grow.
- Credibility: Suppliers, landlords, and lenders tend to take limited companies more seriously.
- Opportunities to grow: Bringing in partners or investors is much simpler with a company structure.
- Pension contributions: A limited company can pay into a director’s pension and treat it as a business expense, a tax-efficient way to save for the future.
When’s the Right Time?
There’s no one-size-fits-all answer, but here are a few signs it might be time to think about it:
- You’re earning a decent profit: Once your business is pulling in more than you need to live on, you can benefit from taking a salary and dividends, often a more tax-efficient way to pay yourself.
- You’re hiring staff: If you’re growing your team, it can make sense to have that extra legal protection.
- You’re investing in new equipment or premises: Having a limited company can make it easier to secure finance or leases.
- You’re worried about risk: The more customers you serve, the more potential for something to go wrong – and that’s when the protection of a limited company can be worth its weight.
How to Incorporate
The good news? It’s not as complicated as you might think. Here’s what’s involved:
- Choose a name: It must be unique and follow Companies House rules (no offensive words, no claims of royal patronage unless you’ve got permission).
- Register with Companies House: You can do this online for £12 – or we can handle it for you as part of our service.
- Set up a business bank account: A limited company must have its own bank account – it’s the company’s money, not yours.
- Understand your new responsibilities: As a director, you’ll need to file annual accounts, a confirmation statement, and a corporation tax return. But don’t worry – that’s where we come in.
- Update your records: HMRC, your suppliers, your landlord – they all need to know you’re now a limited company.
Common Myths (Busted)
“It’s too expensive.”
The registration fee is a one-off £12. Accountancy fees might be a little higher for a limited company – but the tax savings often more than cover the difference.
“It’s only for big businesses.”
Not true. Plenty of small cafés, pop-ups, and food trucks operate as limited companies, it’s about protection and planning for the future.
“It’s too complicated.”
It can feel daunting, but with the right support, it’s much simpler than you might think. We guide plenty of food businesses through it every year.
Final Thought
If your restaurant or café is growing, or if you simply want the reassurance of protecting your personal assets, it could be the right time to think about incorporation. If you’d like a no-pressure chat about whether it’s right for you, we’re here to help. Book a call with one of our accounting experts and let’s see how we can help you grow with confidence.
Restaurants, cafes, and takeaways can benefit greatly from working with a specialist accountant. If you hadn’t noticed already, we are specialist accountants in Leeds for food service businesses, so unlike most accountants, we have years of experience working with businesses just like you. If you're interested in finding out more about how we can help your restaurant become more profitable, book a call with one of our accounting experts.
