Have you been thinking of going limited for your business? It’s easy to set up a limited company with Companies House and the cost is minimal too. The limited liability and lower tax could make a huge difference to your business too. However, there are things you need to know before you go limited.
If you’re the sort of person that hates rules and regulations and you’re not working with a trusted accountant, then going limited may not be the best option for you. Below we have listed some of the main things you need to before you go limited with your business.
A Separate Company
When you become limited your company is separate from the owners or shareholders. This means that if your company goes bust the shareholders will just lose whatever their shares cost them. However, as a sole trader, shareholders are personally liable for the debts of the business. When someone lends a limited company money, they will be likely to ask for a personal guarantee from the directors, so their money is safe.
Separate Bank Account
As a limited company the company will need its own bank account as it’s classed as a legal ‘person’. The company’s money is not your money. To get money out of the company it would be classed as dividends. However, dividends are only payable from net profit after corporation tax. As a limited company owner, you will not be able to take money from the bank account anytime as you would a sole trader, whether you have made profit or not.
A director runs a limited company on behalf of the shareholders. You may earn a salary from the company and then dividends on top of this, if you are a shareholder. You are entitled to any expenses, as long as they are genuine business expenses. If you take money out of the company that is not a refund on expenses, salary or dividends this is classed as a director’s loan.
Things To Do
Every year you must file a confirmation statement that states any changes in capital, shareholders or persons of significant control. You must file accounts no later than 9 months after year end. A corporation tax return must be submitted to HMRC. If you have an accountant, you will find their fees are higher for your business as a limited company than a sole trader. This is because more work needs to be completed.
If you do not have an accountancy background and do not have a reliable accountant in Peterborough to turn to, it may not be right to become a limited company. However, if you are keen to go limited for your business, then call our team for advice specific to your circumstances. We can help set up a limited company and work with you through all the financial and legal regulations.