Article Contributed by Liam Collins
You may have many reasons why you want to start your own business and move away from the permanently-employed-side-of-life. It’s a big change, but it can be the best change you ever experience.
What is a limited company?
A limited company is beneficial for those who want to utilize profit-making activities within a legal framework. This structure limits personal financial risks, as your personal finances are kept separate from the company’s finances. Therefore, your financial liability is limited and is controlled by the amount you choose to invest.
When starting a limited company you need to appoint certain people as ‘directors’ who will be responsible for running your business. Directors often own shares; however, this is not a requirement.
Setting up a limited company is one of the best ways of running a business – as it provides flexibility in structuring income to maximise tax.
Different types of limited companies
Private company limited by shares
Most private companies are companies limited by shares. This means that the shareholders’ liabilities are limited to the amount of shares they own, but have not yet been paid for.
Private company limited by guarantee
In this instant, there are no shares, because the members are guarantors and not shareholders. Essentially, the directors financially back up the company with a certain amount should anything go wrong.
Public unlimited company
Directors or shareholders will be liable for all debts should things go wrong.
Public limited companies
The company’s shares are sold and traded to the public with a minimum share capital of £50,000 and the letters PLC after the name.
How to get started
Follow the basic steps below to find out how to set up a limited company limited by shares:
Register with Companies House
UK limited companies have to register with Companies house, along with the directors and shareholders appointed. This process is called incorporation. The moment your company has been incorporated, it will be recognised as a limited company.
Notify HMRC
If you are going to be employing staff and including yourself as director, there are certain things you need to register for when starting up a limited company – namely corporation tax, PAYE, and NI. You also need to register for VAT if you want to claim VAT on expenses.
File financial accounts
You will need to file financial accounts once a year to HMRC and Companies House. Hiring a professional or a reputable accounting firm will be the best – as you will need to follow specific Generally Accepted Accounting Principles.
Keep strict records
It is important that you keep a record of all your business’s income, as well as, expenses. This is vital, as you will need this information to draw up accurate annual accounts. These records need to be kept for 6 years from the end of the accounting period.
The directors’ job
The directors will have to two main responsibilities, Personal Income Tax, and financial accounts. For Personal Income Tax – they must complete a Self-assessment income tax return annually. For financial accounts – directors must make sure that the financial accounts of the company are accurate.
Company Tax Return
Whether your company makes a profit or not, you are required to send a company tax return following every accounting period. Each company tax return can cover a maximum of 12 months.
By following the above steps, implementing thorough planning, and having 100% commitment – you are able to enjoy a successful business. It’s hard work, but hard work pays off – and at the end of the day there is always help readily offered by individuals and certain companies. Find the right accounting firm to ensure your business receives the help it deserves.
About the Author
This article was provided by Liam Collins of 1st Contact Accounting. This company gives forward-thinking individuals the tools to drive their careers and financial affairs forward. If you would like more advice about setting up your limited company, you can visit the website at www.1stcontact-accounting.com