Setting up a Limited Company as a small business is advantageous as it limits your personal liability and has tax advantages but note that there is more paperwork involved. Any liability from loans or business risks would be limited and would rest with the company instead as a limited company is legally seen as an entity of its own.
Choosing a Director and Shareholders
A company has to have an appointed director and shareholders. A Director is the manager of the business and makes all the important decisions. The Shareholders are the owners of the business and can consist of one to many shareholders. Most Small business owners choose to be both the Director and the Shareholder.
Company Director’s Responsibilities
The company director has a responsibility to run their business efficiently and avoid fines from HMRC and Companies House due to late filing obligations. These include annual returns, annual accounts, company tax returns and paying all corporation tax. The company director will also need to open a company bank account before they can start trading.
HMRC Documents that need to filed by the Director
- A Confirmation Statement which is a check on the company’s shareholders and directors which should be filed with Companies House within 12 days of the anniversary of the company formation
- The company accounts are due nine months after the year end which is determined by the ‘Accounting Reference Date’ set by HMRC
- Company Tax Return must be filed with HMRC 12 months after your year end
- Corporation Tax on profits must be paid to HMRC when company accounts are filed
Director’s salary and company benefits
Once you have set up a Limited Company you can be paid by either taking a salary or taking dividends. As a director you can also choose to take out company benefits such as medical insurance. It is advisable for a Director to sustain the best tax efficient practices by taking out a small salary up to the Personal Allowance threshold. This would mean that no personal tax needs to be paid but your salary should be high enough to ensure that National Insurance stamps are earned. Any additional earnings should be paid in dividends. Note that a director’s dividends up to £5000 are tax free. Any dividends over and above this are taxed according to a specific tax band.
Pearl Accountants provide the following Small Business Services:
- Free QuickBooks / FreeAgent / Sage One Online Accounting software
- Self-Assessment return
- Quarterly VAT Returns
- Payroll service
- Annual Return filing
- Secure bank feeds
- HMRC agent authorisation
- Tax advice on Salary & dividends
- Year Statutory Accounts
- Corporation Tax
How to Setup a Limited Company?
There are a number of Accountants and online companies that can help you set up a limited company with a comprehensive range of services. These normally include Company Formations, Registrations with HMRC and provide you with Memorandum and Article of Association and Share Certificates.
At Pearl Accountants, we specialise in setting up Limited Companies and can assist you in the process, for more information please schedule a meeting and one of our advisors will contact you to discuss your requirements.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.