Once you have set up and registered your business, you may have a number of questions about running a limited company.
Given that a limited company is a separate legal entity from you, there are different rules when it comes to things like taking money from the business, paying yourself and employees, paying corporation tax, bookkeeping, and more.
Limited companies are legally separate entities from the owners, shareholders, and from the person who runs it, the director (or directors). Whether you are forming a new company from scratch or are transitioning from operating as a sole trader to director of a limited company, in doing so, you will inherit a number of different responsibilities when it comes to the day-to-day running of the business.
Once you have set up your company, you can begin trading straight away. A formation agent can expedite the process of getting set up so that you can start running things quickly; you will need some capital to cover the initial costs of getting up and running, a sum that can quickly be recouped once you begin turning a profit.
A director is responsible for running of the business, and is therefore accountable to shareholders for it’s success.
As director, there are a number of things that you will need to oversee as you get started, and as the company grows:
A formation agent can save you substantial time and money when it comes to setting up your company, which means you can begin trading and therefore turning a profit sooner.
In regards to running costs, this will depend on a number of things, such as whether you are a home-based limited company versus a business occupying a premises. Most directors choose to instruct an accountant to manage the books, for which there is an ongoing cost, and if you have anything in the way of a business consultant or adviser, this too could count as a cost. One advantage of being a limited company is the fact that you are allowed more in the way of expenses compared with a sole trader, and so you can offset many of these running costs against taxes.
You are not legally obligated to have an accountant, but many directors find this to be invaluable when it comes to running a limited company.
You should ensure they are fully qualified, and check their references before instructing them. An experienced accountant can help you avoid making expensive mistakes and to remain compliant, and as they have a greater knowledge of the expenses allowable, they can almost certainly reduce your corporation tax bill.
If your annual turnover is less than £5.6 million per year, you will not need to undergo an audit, but for companies with anything over this, the law requires an annual end-of-year audit. You should also do your due diligence when it comes to selecting a person or firm to audit your accounts, as it is illegal for any individual to carry out an audit of a limited company if they are not a registered auditor.
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