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Limited companies

A limited company is a separate legal 'person', which can be formed ('incorporated') almost out of nothing for a particular purpose.  It will have its own name and address, and though the company will be owned by someone, it can carry on a business, employ staff, borrow money and own assets in its own name.
 

Advantages of a limited company

Using a limited company to run your business has the following main advantages:

• There is flexibility in how the profits are paid to the owners of the business, which can lead to savings in tax and National Insurance.  A self-employed individual earning £20,000 per year can expect to save around £1,000 per year in tax and National Insurance, and these savings increase as profit increases.
• The owners of the company have limited liability (hence the name).  This means that should the company run into difficulties and incur large debts, with a few exceptions the owners of the company cannot be held personally liable for those debts.
• It can create a favourable business impression. It shows potential business contacts that you have gone to the trouble of going through an incorporation procedure that results in ongoing responsibilities, and that you are being open about who is involved in the business and its financial position.  It can also suggest that your business is larger than it really is.

If you have not considered running your business through a company before, and would like a discussion about the advantages and disadvantages of doing so, then please telephone us or arrangement a free consultation.
 

Company formation

To form a new limited company, the main options are to complete all the paperwork yourself at Companies House, use an internet formation-only service, or use a firm of accountants like us.  Whilst we are not the cheapest option, we think that your company should get off to the best possible start, and so our company formation service includes:

• Advice on whether a limited company is a good option for you
• Advice on choosing a company name, company secretary, directors and shareholdings
• A quick formation service (we can usually let you know your company registration number within a day or 2)
• An optional introduction to a Brighton-based bank manager, to help get a company bank account opened quickly and smoothly
• Advice on extracting profits from the company in the way that saves the most tax
• Guidance on day-to-day running of the company, in order to stay on the right side of the tax man
• Help with the requirement to register the company for corporation tax
• Free enrolment on a scheme to protect the company from being hijacked by fraudsters.

Ongoing company services

For existing companies, we offer all the ongoing support you need, such as:

• Provision of registered office and boardroom facilities
• Help with changes to the company's share capital or constitution
• Help with company record keeping requirements
• Help with all your Companies House filing obligations.

Frequently asked questions about limited companies

Are there any disadvantages to running my business through a limited company? Show answerHide answer
There are a few downsides, the main ones being:

• There is a lot more accounting work to do every year, and so the annual accountancy charge is higher.  We usually find that our fee has to be at least £500 per year higher than an equivalent non-incorporated business.  Because of this, we would only recommend a limited company to you where we were confident that the advantages outweigh the extra cost.
• A limited company is required to file the name and home address of its company secretary, directors and shareholders on a record that is accessible to the general public (for a small fee).  A simplified balance sheet must also be made available for public inspection, but not details of sales or profits.
• If the self-employed work that you do has similar features to that of an employment, you may be taxed at a much higher rate, due to the rules known as IR35.  This may apply if, for example, you work most days of the week for a few consecutive months for the same client, and you are paid at a fixed hourly or daily rate.

What information do you need from me to form a company? Show answerHide answer
Having first agreed that a company is a good option, the information that we need is as follows:

• Your chosen company name
• Whether you wish to use our address as your registered office.

Every company must have at least one director.  For each company director, we need to know:

• Full name
• Any previous forename or surname
• Home address
• Date of birth
• Nationality
• Business occupation
• Other directorships, if any
• How many shares in the company they are to have.

If you can also let us know the first 3 letters of their eye colour, birth town and mother's maiden name, we can appoint them by internet on the day the company is formed, which is the quickest way of getting the company started.  This is optional, and the information is not made public.

It is now a requirement for all accountants to obtain proof of identity of all new clients, and so for each director and shareholder we ask that you supply a form of ID that includes recent confirmation of the current address.

Who can be a company secretary and company director? Show answerHide answer
Unless the company is a plc, almost anyone can be appointed - no special skills or qualifications are needed.

The company secretary is mainly an administrative role, which carries little power or responsibility.  A trusted friend or family member is usually a good choice.  From April 2008, it is no longer be necessary for a private company to have a company secretary.

Directors have full power to manage the company and enter it into contracts, so they should be chosen carefully.  Equally, a company director can in certain circumstances be held personally responsible for various failings of the company, so it is not a role to be undertaken lightly.

What tax does a company pay, and when? Show answerHide answer
A small company pays corporation tax at the rate of 21% of company profits (before dividends). It is due once a year, 9 months after the end of the accounting period. If your accounts cover more than one year, they are divided into one period of 12 months and a second period to cover what’s left. A payment is then needed 9 months after the end of each sub-period. Interest is charged on any tax paid late. It is calculated on a daily basis, at an annual rate of around 7%. For details on how to pay, see here.

Got another question?  Email us and we'll try to help.