| CHOOSING THE BEST OWNERSHIP STRUCTURE FOR YOUR BUSINESS: LIMITED COMPANIES Limited companies are cheap and easy to set up and they protect the directors by limiting their liability for any debts run up by the company to the amount that they have invested in it. However, this protection is removed if any director acts in any way that is unlawful, negligent or not in the best interests of the company (i.e. in the best interests of the shareholders on an ongoing basis). The directors are also liable if the company continues trading beyond the point when it can reasonably expect to meet its outstanding liabilities. In this situation, the directors are personally responsible for any additional liabilities incurred after the company has reached this point.
When creating a limited company, directors must be clear about their individual rights and responsibilities; the rights and responsibilities of their fellow directors; the fundamental issues that will need the unanimous agreement of all directors; and the procedures that will be put in place for resolving any disputes. Directors should make sure that they are familiar with the company's internal rules and procedures and that they read all documents (e.g. minutes of board meetings) carefully before signing them.
Being a director of a limited company carries a number of additional responsibilities. Companies are obliged to prepare annual accounts and file a copy with Companies House. Company law requires that certain information appears on all correspondence issued by the company.
The business is registered with Companies House and is an entity of its own. There are more rules associated with running a business this way but there may be tax advantages. Those involved have shares in the business which are proportional to their involvement. A limited company is regarded in law as a separate legal personality, distinct from its shareholders. As a result of this, if the company for any reason is unable to meet its liabilities, the shareholders will only be personally liable for the unpaid amount of their shares. If the shares are fully paid, then the shareholder cannot be asked to pay anything further.
It is therefore, strictly speaking, incorrect to say that a company has limited liability; it is the shareholders whose liability is limited - up to the unpaid amount of their shares. This situation must be contrasted with the personal liability of a sole trader or a partner in a partnership (with the exception of a partner with limited liability or in the case of a Limited Liability Partnership (LLP)). In these cases the sole trader or partner may be personally liable for any debts which the business is unable to meet. As noted above, there may be instances when personal liability cannot be limited. This situation usually affects directors who may be personally liable if they have acted fraudulently or negligently. In particular, you should be aware of the personal liability which can accrue to directors if their company trades whilst it is insolvent.
Whilst the limitation of liability can appear attractive, you should be aware that in certain cases, notably when dealing with banks or other financial organisations, personal guarantees may be requested from the directors, and/or shareholders. These may then negate this particular advantage.
The UK distinguishes between employment income and self-employment income. Directors are taxed on the basis that they have employment income. But in some countries the dividing line is drawn at a different point and directors who are not full-time officers may be treated as independent contractors (that is, as if they were self-employed). All businesses have to comply with certain legal requirements. This can include requirements in relation to health and safety, Trade Descriptions Act, Data Protection Act and Employment Law, to name but a few.
As well as being a legal requirement, good health and safety practices pay for themselves by improving the reputation of your company with customers, the local community and most importantly your own employees. If you employ five or more people, you are required to prepare a statement of policy on health and safety at work and to make arrangements to put this policy into practice. We deal with new or existing business ventures in the United Kingdom and elsewhere, UK property deals, and private client matters as follows: advice on business structures, their acquisition and disposal, the formation of companies, partnerships, trusts or hybrid business structures, directorship and shareholders services, business bank accounts, agreement and statement drafting, advice and representation in personal and business visa and immigration issues, etc. | If your business is at an advanced stage of development your needs may be varied and you will need to make an appointment with us to discuss your circumstances. You can use our advisory service where we will store all your company records and provide you with a summary of the financial position of your business. Every quarter you can then meet one of our accountants for a check on your business and plan for any new developments. Alternatively you may need specific services such as VAT returns, Payroll or statutory accounts preparation.
If you want to focus on earning company turnover and do not want the burden of company administration and accounts, this service will suit you. Get rid of the hassle without losing control! This service is designed for the busy executive who wants to focus on earning company income without the daily administration involved in running a company.
-We will handle all administration and run a payroll for directors and shareholders
-We will provide you with a detailed breakdown of your company position as and when you need it
-We will do all company administration including all statutory requirements for Companies House and HM Revenue & Customs
-We will complete VAT and corporation returns and ensure these liabilities are provided for and paid on time.
All you will have to do is invoice your client for your income and provide us with a copy of these along with the business expenses that you incur. SELF EMPLOYMENT vs. LIMITED COMPANY
As many know, employees have rights on how many hours a week they must work on average. Most employees do not work more than forty-eight hours a week and receive overtime pay for additional hours put in. When self-employed, however, these rules do not apply. A self-employed person could work seventy hours a week, if that is what is needed, and would get paid no overtime or nothing else additional. Because they work for themselves, their wages depend on what they bring in.
Another responsibility that is given to the self-employed is taxing their income. A self-employed person must allow for his or her own tax payments and follow the guidelines set by the government. Normal employees depend on their employers to do this task for them.
Self Employment Vs Limited Company: Which is the Best Option for me?
There are advantages and disadvantages to each of these options. However there are substantial tax benefits from being a Limited Company as you can save on paying National Insurance Class 4 contributions.
Being a LIMITED company also protects your personal assets should your business get into financial difficulty. If your starting capital is restricted and you expect to earn under £20,000 then it may be worth being self employed then changing to being a Limited company when have more money available to you.
All businesses have to comply with certain legal requirements. This can include requirements in relation to health and safety, Trade Descriptions Act, Data Protection Act and Employment Law, to name but a few. As well as being a legal requirement, good health and safety practices pay for themselves by improving your reputation with customers, the local community and most importantly your own employees. If you employ five or more people, you are required to prepare a statement of policy on health and safety at work and to make arrangements to put this policy into practice.
Before starting trading you will have to decide which structure you intend to trade under. This will be dependent on the type of business you are running and how you intend to develop in the future. We can help you through this process. |
