How to set up a limited company – we make it easy

Your duties and responsibilities as a limited company director

We’ve written a detailed article with all the info about your responsibilities as a limited company director, what you need to file and what the deadlines are. But in summary, as a limited company director, you have certain duties and legal responsibilities. These include:

• Your newly set up limited company must be registered at Companies House
• Annual accounts and Confirmation Statements must be completed and filed with Companies House every year by the due date
• You’ll need to maintain and submit a record of anyone who has significant control over the limited company. A person of significant control is someone that holds more than 25% of shares or voting rights in a company, has the right to appoint or remove the majority of the board of directors or otherwise exercises significant influence or control. This is known as the PSC register.
• HMRC must receive your accounts every year.
• An annual return must be completed and any Corporation Tax owed must be paid to HMRC within nine months and one day of the limited company year end.
• Register for Self Assessment and send a personal tax return to HMRC every year (this requirement does not apply if your company is a non-profit organisation, such as a charity, and you didn’t get any pay or benefits).
• Follow the company’s rules, as shown in its articles of association.
• Keep company records and report changes.
• Tell other shareholders if you might personally benefit from a transaction the company makes.

You may engage other people to manage some of these things day-to-day (for example, an accountant), but you’re still legally responsible for your company’s records, accounts, and performance. You may be fined, prosecuted, or disqualified if you don’t meet your responsibilities as a director.

Certain people are prohibited from acting as a director of a company, including persons under 16 years of age, bankrupts, and disqualified persons. While there is no mandatory qualification required to be a director, a director is required to perform the duties outlined above and must be capable of doing so.

As a director, you must make decisions for the benefit of the company and not yourself. This may seem confusing if you are the sole shareholder, employee, and director, but a decision that may benefit you personally may adversely affect the company’s performance.

But isn’t it difficult to be a limited company director?

Short answer: it shouldn’t be.

Traditionally, being a sole trader has been thought of as the easiest option for running a small business. As a sole trader, your tax responsibilities are easy to account for, if not necessarily as efficient as they could be. But many of our clients have enjoyed the benefits of switching from a sole trader set-up to a limited company business structure.

It seems wrong for a freelancer, contractor or small business owner to be put off saving tax because of the perceived hassle involved.

The key to getting it right

As a freelancer, contractor or small business owner, it’s important to have the systems in place to take advantage of the tax-savings afforded by a limited company without having to spend ages on irritating admin duties. You shouldn’t have to pay astronomical accountancy fees, either.

You’ll know you’ve got the right accountancy solution when your accountant is doing most of the work for you and leaving you with greater take-home pay. Being a limited company director should be blissfully easy, and Accounting Wise ensures it is.

Maintaining your limited company

There are many horror stories of freelancers or contractors who’ve had a nightmare with running a limited company, either because of accountants who left them to fend for themselves or a hackneyed attempt at DIY accounting.

One of the important jobs of a good accountancy service is to ensure that you spend as little time on your accounting as possible. At Crunch, our service combines online accounting software with expert accountancy advice, so that you have everything you need in one place.

The bread and butter of running a limited company is drawing up and sending invoices, plus keeping a record of expenses. Both of these can easily be done if you use online accounting software, which provides templates, automatically calculates VAT (should you be VAT registered) and enables simple recording of expenses. These are the same processes you’ll have been used to as a sole trader, but now you need to make sure that you keep on top of these to understand how your business is performing and how much you can take in dividends.

Preparing and filing tax returns

What’s important to keep in mind is how crucial it is to have a good accountant and sophisticated online accounting software (Accounting Wise provides both) with which to take away the strain.

For example, with Annual Accounts, you barely have to do a thing – the accountants our end will perform all the necessary actions, leaving you to simply approve your accounts. It’s annual accounts at the click of a button!

Dealing with your tax paying and filing duties can become a muddle when business owners keep all their information in separate places. However, when it’s all organised in one secure online system, the information is readily available and it becomes significantly easier to file returns and accounts for taxes. If there are any problems, our team of expert accountants are on hand to help.

Claiming back pre-trading expenses from your limited company

It’s entirely possible that you have incurred business costs prior to forming your limited company.  You can claim ‘pre-trading’ expenses for things like:

• Computer equipment and software
• Domain name registration
• Office rent
• Business insurance
• Stationery
• Accountancy costs
• Travel costs.

Just remember that the expenses have to have been solely for business and not personal use. You’ll also need your receipts and proof of purchase as well, as you would for any company trading expense. Bear in mind that any training costs incurred prior to incorporation aren’t allowable, nor are preliminary activities such as writing a business plan or negotiating contracts.

There is one final bit of good news. You can claim any expenses incurred within seven years of forming your company. Make sure you keep every receipt or invoice and get it filed when running a business – they’ll always come in handy.