A limited company allows an entrepreneur to keep their own assets and finances separate from their business. You are only liable for any company debts up to the level you've invested. It is therefore a good way to get investment without risk to your own personal wealth. A limited company is seen as an entity in its own right. The advantages and disadvantages of this type of business structure are as follows:
Limited liability; as mentioned before, the obvious advantage is the reduced financial risk for investors. You are only liable to lose what you put in, providing a comfortable feeling of security for investors.
Separate entity; the company is seen as a legal entity from its owners. The company will exist beyond the life of its members. If they retire or die, the company will continue to exist and operate.
Taxation; limited companies are only taxed on their profits (20% up to £300,000) and as such are not subject to the higher (personal) tax rates that can be applied to sole traders and partnerships, which can reach 45%. Tax Compute are able to offer advice on the most tax efficient way for the directors of limited companies to pay themselves.
Ownership and control; the directors are usually the main shareholders of the company. Thus, ownership and control remains in their hands. Decisions can be made quickly, allowing for a more successful business management platform.
Company name; part of company registration includes the registration of a Company name. The name can help identify the company in the marketplace, separating it from other companies and protecting it.
Status; the business looks bigger and more professional.
Complex accounts; the rules governing limited companies require a more complex reporting procedure. Companies are required to produce yearly accounts and submit these to Companies House. Due to the (usually) larger nature of Limited Companies, accounts preparation can be a time consuming and more costly process than that of, say, sole traders.
Administration; directors are required to submit statutory documents to companies house and can face penalties if these are late. Tax Compute can manage this by registering your company address to our offices. That way all correspondence with HMRC and Companies House comes to us and we can make submissions on your behalf.
Privacy; company financial statements are made available to the public.
Tax Compute can help you decide if forming a Limited Company is the right way forward and, if so, can assist you in the formation of one.
We carry out an analytical review and quality checks before submitting your tax return. We ensure compliance and timely submission.
Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy.
The VAT return shows the calculation of the amount of VAT due on sales minus the amount of VAT reclaimable on purchases. The result is the amount payable to HMRC.
Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation
Within a company, payroll is the combination of all of the financial records of their employees' salaries, wages, bonuses and deductions. In accounting, the term payroll signifies the amount that has been paid out to employees for the services they have done for the organization within a certain period of time
Corporation tax is a tax placed on the taxable profits of limited companies and other organisations such as clubs, societies, associations, and unincorporated entities.
You can register online with Companies House if your company is limited by shares and uses standard articles of association (known as 'model articles'). Otherwise, you must use a different method of registration. Your company will also need to register for Corporation Tax within 3 months of starting to do business
Working outside the scope of IR35 and knowing what is claimable are the two most important issues when freelancing or contracting.
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