This guide is meant as a ‘tick list’ to help anyone starting a company to meet their responsibilities as a Director of a Limited Company.
What is a Limited company?
A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances.
Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits with its shareholders.
It is worthwhile thinking about a Limited company as person, it can raise finance in its own right and own assets such as machines and vehicles.
Every limited company has ‘members’ – the people or organisations who own shares in the company.
Directors are responsible for running the company. Directors often own shares, but they don’t have to. Directors can be thought of as the ‘parents’ of the company who ensure that it is run correctly. As directors there are a number of legal responsibilities to be adhered too:
• try to make the company a success, using your skills, experience and judgment
• follow the company’s rules, shown in its articles of association
• make decisions for the benefit of the company, not yourself
• tell other shareholders if you might personally benefit from a transaction the company makes
• keep company records and report changes to Companies House and HM Revenue and Customs (HMRC)
• make sure the company’s accounts are a ‘true and fair view’ of the business’ finances
• register for Self Assessment and send a personal Self Assessment tax return every year
Other people may be engaged to manage some of these things day-to-day (eg an accountant) but the Director is still legally responsible for your company’s records, accounts and performance.
There are a couple of different types of Limited company – please seek further advise for the best structure for you. The most common is a private limited company which is limited by shares, which is the structure used in this guide.
Setting up a Limited company
All Limited companies have to be registered at Companies House, to do this you must have the following:
• a company name – there are rules on what it can and can’t include
• an address for the company
• at least one director
• at least one shareholder
• the agreement of all initial shareholders (‘subscribers’) to create the company – known as a ‘memorandum of association’
• details of the company’s shares and the rights attached to them – known as a ‘statement of capital’
• written rules about how the company is run – known as ‘articles of association’
The easiest way of setting up a limited company is to use a formation agent or accountant.
Following the establishment of a limited company you have 3 months to notify HMRC and register for corporation tax – this can all be done online.
This tick list is a summary of other considerations that should be made when setting up to trade as a limited company. This is not meant to be exhaustive, but will provide a good basis for a director to meet there judicial responsibilities as well as other requirements, please print this off and use as a tick list for your own records
Company Formation Date: …………………………….
Year End date (Accounting Reference Date): ……………………….
Accounts to be filed: ……………………………
Annual return to be filed: ………………………….
• Set up a company bank account
• Register the company for VAT (if required – note the applicable thresholds)
• Engage accountant
• Complete business plan and forecasts
• Apply for funding
• Register for Self Assessment (Directors)
• Submit annual return (note that from the 30 June 2016 this has been replaced with Confirmation Statement)
• Submit annual accounts
• Submit Corporation Tax computations and pay Corporation tax
• Complete Self Assessment (Directors)
• Submit VAT Return
• Revisit Business plan and forecasts – reforecast if required
• Review business performance
• Review management accounts (if completed monthly)
• Ensure all bank/lending covenants are adhered too
Obviously the above is not meant as exhaustive. The majority of the above can be outsourced, however, to reiterate ultimate responsibility for the company does lie with the Directors.
MI Accountancy Services Ltd have produced this document using information provided by Companies House, HMRC and other literature. We cannot accept any responsibility for content. It is always advisable to seek specialist advice prior establishing a company to ensure that all affairs are in order.