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LIMITED COMPANY in uk
HOW TO SET UP A COMPANY IN THE UK?
When you first started a business, you most likely had Seld-Employed status. However, after a while, it would be more convenient to set up a company. Setting up an LTD company is a fairly simple process, but it is important to know how your legal position, financial arrangements and other responsibilities will change.
WHAT IS AN LTD?
Private Limited Company, abbreviated LTD is a limited liability company. It is a legal and financial entity separate from the person or persons who run it (ie the directors of the company). The main advantage of this is that a LTD has limited liability to creditors and if your business fails or the company is sued, the debt will be settled only from the company's account within the available assets, and your personal assets are protected. An LTD has one or more directors, has its own bank accounts, pays its own type of tax, can be bought and sold and must be registered with Companies House.
WHY SET UP AN LTD?
The great advantage of an LTD is that it provides limited liability. The company is a separate legal entity (it has its own bank account, etc.), so as a director of the company, you can only lose the company's assets. This is the main advantage of having a Self-Employed business, namely that your personal finances are completely separate from the finances of your business. This means that if your Seld-Employed business is facing difficulties or is sued, personal property would be at risk. With an LTD, your personal belongings are protected. Another good reason for setting up a LTD company is that the corporate tax rate is lower.
WHEN SHOULD YOU GO FROM SELF-EMPLOYED TO ESTABLISHMENT COMPANY LTD?
Being Self-Employed is a good way to start a business and check if this form of organizing your business works. There are no business registration fees, you make all the decisions without having to consult other directors or shareholders. However, the Income Tax rate is higher than the corporate tax rate that a company pays and you are personally responsible for the debts of your business. This means that as your turnover increases. , it would be more convenient to set up a LTD. Setting up a LTD company opens up several ways to finance your business. As a Self-Employed, you can take out business loans from banks, but you can't get financing from the sale of shares in your business. With a company, you can benefit from both.
7 STEPS FOR SETTING UP AN LTD
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Check if it suits you
Make sure an LTD is the most appropriate form of organization for your business.
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Choose your company name
Your company name should be unique and not too similar to the name of an existing company. The name should not be offensive, obscene or suggestive of being a government organization. The use of "delicate" names (e.g. England, Dentist, Bank, etc.) requires the approval of the authorities. In order to check the availability of the company name, check here.
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Name at least one director
Your company must have at least one directory (ie you), but it can have several. Directors make joint decisions for the company, must abide by its rules and be responsible for preparing and submitting annual financial statements (Year End Company Accounts & Tax Return) and ensure that the company pays its profit tax. You can also appoint a company secretary, although this is not mandatory. The company secretary ensures that the decisions of the directors are executed, ensures that the company complies with the regulatory requirements and takes care of other management tasks of the company.
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Decide who the company's shareholders will be
A company must have at least one shareholder, who can be a director. Shares can be shared between directors (not necessarily uniformly). Shareholders usually vote on decisions at shareholders' meetings, with a share equal to one vote, so that the majority shareholders have more influence. A shareholder with more than 25% of the shares is a "People with significant control" (PSC).
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Create company documents
Your company must have certain documents that recognize its training and determine how it will be administered. These are:
-The memorandum of association, this is a legal declaration signed by all the company's shareholders who agree to form the company together.
-The articles of association, these are the rules on how to manage the company, agreed by shareholders, directors and company secretary.
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Responsibilities and obligations
You will need to keep track of all significant details about the company, including its PSCs, as well as all of its accounting records. Records must be kept for at least six years. Find out more on the government website.
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Register your company at Company House
Register your company and official address at Companies House. Make sure you select the correct SIC code, as it specifies your business scope.
ESTABLISHMENT OF LTD COMPANY, A FIRST STEP
You can register your company at Companies House online or by mail using the form IN01. The company will be registered within 24 hours of receiving your request, if you do it online. Postal registrations can take up to 10 days. After registering your company, you will receive by email the certificate of incorporation (Certificate of Incorporation) which confirms the legal existence of the company and which includes the company number and the date of establishment and in a few days you will receive by mail the company number of Unique Taxpayer Reference (UTR).
WHAT TAXES WILL MY COMPANY PAY?
Your company must pay Corporation Tax which is 19% of corporate income tax. Once your business is registered with Companies House, in order to be active, you must enroll in Corporation Tax within three months of activating it. Being an active company means that your business provides services and receives revenue - this is also known as "trading". If you are not sure if this applies to your company, consult your accountant. If you register too late for Corporation Tax, you could receive a fine. You will need to file an annual tax return for the company (Year End Company Accounts & Tax Return) by the deadline set by the HMRC. You will also need to register for the PAYE salary scheme if the company pays salaries (including yours as a manager). Likewise, your company will have to register for VAT (VAT) if the turnover exceeds £ 85,000 or you may want to register voluntarily until you reach this threshold. Learn more about small business taxes here.
HOW WILL I BE PAID BY MY COMPANY?
There are two main ways in which, as a director, you can earn income from your company. You can take a salary or pay dividends from the company's profits. Most directors choose a combination of the two, as this may be the most tax-efficient. The advantage of dividends is due to a lower tax on them. However, you can only pay them out of profit. The advantage of a salary is that it entitles you to various benefits (such as state pension and maternity / paternity leave). However, the salary is taxed at a higher rate. Learn more about how you can earn revenue from your own company.
LEGAL RESPONSIBILITIES
As a director, you will have certain legal responsibilities, including preparing financial reports and informing shareholders about the results of the company's business. Of course, you can appoint an accountant and / or company secretary to perform these tasks on your behalf.
REPORTING AT THE END OF THE YEAR
At the end of the financial year, the company must present the financial statements to HMRC and Companies House. This ensures that the company pays the tax it owes and also provides accurate information about the company to shareholders, investors, creditors and the general public.