Businesses come in all shapes and sizes, but while being a sole trader can be very straightforward, there are clear business benefits to turning your business into a limited company.
“One clue is in the name, limited. As a limited company you have limited liability, and the means to be more tax efficient. You can also protect your company name much more effectively than you can as a sole trader.”
It is also a case that for many contractors, agencies will only work with them if they are registered as limited companies.
Becoming a Director
Setting up a business as a limited company means becoming a company director.
“Whether you’re upscaling or starting out as a limited company, this will mean you will have certain things you must do as a director, including legal obligations.”
A director’s duties include:
- Exercising reasonable care, diligence and skill
- Using independent judgement
- Acting within your power
- Avoiding conflicts of interest
- Promoting your company’s success
Legally, a director must register the company with Companies House, and complete and file a yearly Confirmation Statement.
“You must always let Companies House know of any changes in your details, or the details of your company secretary.”
Becoming a limited company means keeping detailed, accurate accounting and financial records.
These must include:
- Details of money spent and received
- Assets owned
- Debts owed and owing
- Stock and stock-takings
- Goods bought and sold
“HMRC can decide to check your records at any time, which means you must keep on top of them. With the phasing in of Making Tax Digital, it will be a case of doing this in real time, which actually might be more useful for companies in helping them keep things up to date.”
Keeping good financial records benefits the individual business, but failing to do so also can result in financial penalties, or even disqualification by HMRC.
“Companies must also file annual Company Tax Returns with HMRC, which includes Corporation Tax information.”
Setting Up and Accounting Support
“Business owners should always remember they don’t have to do things alone. When it comes to setting up as a limited company and keeping your accounts in order, there is professional help out there.”
“For SMEs, scalability asks demanding questions of them, and brings challenges along the way”
“At One Click Group, we’ve devised an easy means of setting up a limited company online. This will help businesses and contractors make that crucial step forward.”
This process includes:
- Incorporation of the company
- Appointment of directors
- VAT and PAYE registration
- Registration and authorisation with HMRC
“We also provide the added value of financial guidance regarding salary, expenses and dividends, plus optional assistance in other areas, including assessing IR35 risk,” Mike concludes.
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