Quick answers to your common questions, we present the FAQ’s...
If you have another query please get in touch and one of our staff will be happy to assist you, simply click the contact link above.
What is a Limited Company?
A limited company has a separate legal entity to its owners, unlike a sole trader or partnership. A sole trader is personally liable for the business’s activities, putting the owner’s personal assets at risk should the business face financial problems. Members of a partnership are also jointly and severally liable unless it is a limited liability partnership.
Why become Limited?
The owners of a limited company have limited liability for the debts of the business up to the value of their shareholding; they are not personally liable for the company’s debts (unless personal guarantees have been given, or the business has been trading fraudulently). If the business fails the shareholders only lose the amount they have invested in the company. It also means that the company name is protected and the company can continue to trade if one of the members leaves.
In many cases being a limited company also looks more professional, and can help confirm to prospective clients you are a serious organisation.
What am I required to submit if I go Limited?
Being a limited company you are also required to submit the following to Companies House each year:
- Submit company accounts each financial year to Companies House and the Inland Revenue
- Submit an Annual Return each year to Companies House which shows the current directors/shareholders of the business
It is important these are filed on time every year, or the business will be liable for a fine, which can amount to many thousands of pounds depending on the lateness.
You will also be required to register with the Inland Revenue for:
- Corporation tax - annual taxation on any profits generated by the business
- PAYE contributions - if you will be taking a wage and paying staff members
It is always wise to consult an accountant if you are not sure about any financial area or element of your business, avoiding mistakes can save time further down the line as your business grows.
Do I need to register for VAT?
You are not required to register for VAT until your annual turnover exceeds £56,000, however if you expect this to be the case in your first year you can register before the threshold is reached.
Registering for VAT means you need to charge VAT on all vatable products/services you business sells, every quarter you must pay HMRC the difference between the VAT you have charged your customers, and the VAT you have paid out on goods and services, therefore accurate records are key to making this a smooth process.
For example if your spent £1175 on goods in your last quarter, the VAT paid by the business would be £175, if you sold £2350 of goods to your customers, the VAT you charged out would be £350. So the balance due at the end of that quarter would be £175 to HMRC.
If you paid out more VAT than you charged out, then you would be eligible to claim that amount back from HMRC.
Registering for VAT has become a simple online process, and can be done through the VAT online website - here
How do I change our Company Details?
You can change many common company details using the easy to fill out forms (available from our forms section). These allow you to add/terminate a director and change your registered office address, simply fill them in, print, sign and post to Companies House.
For any other changes not listed, let us know and we can point you in the right direction.
Setting up a Bank Account
Most High Street banks are happy to welcome new businesses, with offers such as free banking or helpful information to start you off on the right track.
Generally they will require a copy of your Memorandum & Articles, Certificate of Incorporation and if you require borrowing a business plan is always useful. Both of these are available from our secure online portal once your company has been formed. Once you are ready to go simple call up and make an appointment, so long as you have all the ID and information usually setup takes no more than 10 - 14 days, however it will depend on your requirements.
Any other helpful hints?
Organisation and hard work are the key to making any business successful, especially key is keeping on top of your finances.
- Online tools such as Freeagent Central allow you to manage your accounts online with a simple and straightforward web interface. Ideal if you find the idea of accounts daunting or complex.
- Alternatively it is always wise to take up the services of a local reputable accountant who can help make sure everything is done correctly and accurately.
- Register for online banking and check your account regularly.
- Draw up a business plan and cash flow for your first 12 months, not only does it let you see how realistic your plans are, its a great benchmark to measure the business against. Be careful with the pennies, and as the old adage goes 'Don't run before you can walk!'.
- Finally, have fun, its hard work but there is little more satisfying than seeing your business take off!
I am still not sure I need to be Limited?
Becoming a limited company isn't for every business, and you can happily trade a sole trader or partnership, if can be worth speaking to your local business link (who provide workshops and seminars packed with ideas and advice) or a local business advisor to see what the best option is for you.
