Should I set up a Limited Company?
The main reason to set up a Limited Company is to have Limited liability. By setting up a Limited Company you are in effect creating a separate legal entity. As such it has a life of it’s own.
What is the difference between a shareholder and a director?
The shareholders own the company and the directors run the company. So in effect the shareholder entrusts the company to the directors to look after their company.
It is the directors’ responsibility to run the company in the interest of the shareholders.
The director and the shareholders can be the same people and they may be company’s themselves.
What does starting a company involve?
To start a company is relatively easy. Once you have decided on your shareholders and directors you can start up a company in less than a week with Companies House. The main documents you need are your ‘Memorandum of association’ signed by your shareholders and your ‘Articles of association’ which set up the rules of how the company is to run. Templates for these can be found online.
The directors must file with Companies House (whether or not the company is trading)
- An annual return; stating the registered office, shareholders, directors and business activity if the company
- A set of annual accounts to be filed with Companies House and held on public record. The accounts must be of the format set put by company law.
What are the responsibilities of the directors?
It is the directors responsibility to makes the company a success, but more specifically for HMRC and Companies House purposes
- 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
- file your accounts with Companies House and your Company Tax Return with HMRC
- pay Corporation Tax
- register for Self Assessment and send a personal Self Assessment tax return every year – unless it’s a non-profit organisation (eg a charity) and you didn’t get any pay or benefits, like a company car
What do I have to do if I am a sole trader?
Firstly when you start trading you must notify HMRC that you are self employed. From the date of self employment HMRC will require a tax return to be filed. In order to fill in the tax return certain information is required and a set of accounts may be needed to fill in the accounts section of the tax return
What is involved in setting up a partnership?
The first thing would be a partnership agreement. A partnership is not a Limited company and does not offer Limited liability. The partners are joint and severely liable for the actions of the partnership.
Like a self employed person the partnership must file a tax return.
The profits are then split between the partners and these are represented in the tax return of each partner.
Can I claim mileage allowance?
Use you can and how much you claim is based on what you drive or cycle and how many miles you do. The mileage allowance is to cover all petrol costs and wear and tear of your vehicle.
Can I claim use of home as office?
Yes you can. This needs to proportional to the amount of office space in your home and the time spent using your home as an office. HMRc do allow a small estimate to be used instead.
Should I pay myself a dividends or a salary?
If running and owning a Limited company you may pay yourself a salary and some dividends. Whilst it was a lot more tax efficient to pay yourself a small wages and the rest as dividends this is no longer the case. It is still more tax efficient but not by quite as much. Each case would need to be reviewed separately as it would depend on any other income you may have.
Does it cost extra to use the accounting software?
Yes it does and it depends on what version you need. The costs are incorporated into the packages we offer but can be paid for separately if you require only some services and not others.
What is Receipt Bank?
Receipt Bank allows you to record your receipts and invoices electronically and can be integrated with your accounting system. It allows you to relay information on purchases in the most efficient way and records them so you can work towards being a paperless office.
What is Xero?
Xero is an accounting system. That gives the user real time information on their business and integrates with your business bank accounts to give up to date business information.
Do I need to run a PAYE system?
If you have employees you will need to set up a PAYE scheme. Depending on the number of employees and how often we can run this at Braiden Accounts or we can find a suitable outsourced solution.
If you have any suggestions for question I should add to this page please just ‘Ask Braiden’?