Setting Up A Limited Company
Are you setting up a limited company in the UK?
Although there is perceived prestige in operating as a limited company you will lose some of your privacy – directors’ and shareholders’ personal details and abbreviated accounts have to be filed and are open to public scrutiny.
A limited company is a distinct legal entity that is able to enter into contracts in its own name. The only exception is if you, as director of the company, offer a bank or other creditor a personal guarantee to repay the company’s debt. In that instance you then become personally liable to repay the debt if the company is not able to.
Limited liability – The company is a separate legal entity and this can protect your personal assets from business creditors if for any reason the company is unable to clear all of its debts and has to cease trading. Operating as such is especially useful if there are significant risks associated with your business activity.
Due to the Limited Liability, companies look like a more secure prospect to investors. The business artificially looks bigger and more professional. Succession of shareholders is more straightforward.
Tax efficiency – trading as a limited company can be more tax efficient due to dividends not attracting National insurance and the notional tax credit.
The professional costs for setting up the company and for preparing company accounts and tax returns can be higher than those you would expect to pay if you were self-employed. There are then additional costs involved with various Companies House requirements.
Companies must file their accounts and various other documents on public record with Companies House, so companies have less privacy than unincorporated businesses.
As a general principle, you tend not to have ‘mixed-purpose’ expenditure by a company; it either is for business purposes; or it’s not. Any losses generated by a company, belong to the company. Therefore, they cannot be utilised by the directors or shareholders.
Audit requirement – If your company exceeds certain limits, or is in a particular trade sector, an audit may be required thus incurring further costs.
Here at The Hollies Bookkeeping Services we can assist with setting up a Limited Company with Companies House, getting all of your paperwork including Share Certificates and Company Number through. We can also submit your Companies Annual Return for you prior to your annual year end. We work very closely with either your accountant or can provide the accountancy services for you to submit your final accounts to Companies House and calculate you Corporation Tax with HMRC. If you require us to provide this service, we are only too happy to introduce you to our preferred accountant.