A business can take different legal structures within the UK. Often, an entrepreneur may well start doing business as a sole trader but choose to set up a limited company that is a totally distinct legal entity from it’s shareholders and managers. One of the biggest advantages of setting up a limited company for your SME will be that even if you effectively own and run the whole operation, you cannot be held financially responsible for the company’s debts and obligations. “Limited Liability” it’s called.
If you do set up a limited liability company for your business, here are some responsibilities and roles that you need to consider:
Directors Responsibilities – You’re likely to be a director of your limited company. This means you need to create a set of company rules (called the Articles Of Association), and will need to ensure that all company trading is sufficiently recorded and reported to HMRC. Annual company accounts will need to be submitted to Companies House too. You might well choose to hire an accountant to help you prepare your company accounts, if this is not a strong suit of yours.
Annual Companies House Return – The annual return that you submit to Companies House must contain a number of details about the organization:
- Details about the type of company and its raison d’être.
- The company’s registered address.
- Details of the type of limited company (is it limited by shares or guarantee?)
- The details of directors and the company secretary.
- Particulars about how many shares there are and who owns them.
How Money Can Be Withdrawn From A Limited Company – The three major ways that a director can withdraw money from a limited company are via salary, dividends and director loans. To pay yourself or other company employees a salary, your company must register as an employer with HMRC. Aside from salary, the company will be responsible for paying National Insurance contributions, as well as considering income tax. Dividends are one off payments that may change from year to year, and are often used as a payment tool when a company does not generate sufficient profits to justify a salary. Finally, director loans are also one further way to withdraw funds from a company.
Reporting Company Changes To Companies House & HMRC – Typically, you’re going to have to get on the phone to HMRC and inform them when your business contact details change, or if you hire an accountant or tax adviser to manage your accounts. Companies House need to be informed when substantial changes happen to your business, such as the following:
- A change in your registered business address.
- A change in the address where the company records are stored.
- A change in the directors, or their place of residence.
- Appointment, removal or changes to the company secretary.
- Any changes in the number of company shares issued.
It’s possible to make these changes by going to the Company House website and filling in the new details via online forms, or by filling in manual paperwork and posting it directly to the Companies House.