Limited Companies

A limited company is a distinct legal entity that is able to enter into contracts in its own name. The fact that the company is a separate legal entity from its owners is very important as it means that all the company's liabilities are the responsibility of the company - not that of the directors and shareholders!

The only exception is if you, as director of the company, offer a bank or other creditor a personal guarantee to repay the company's debt.  In that instance you then become personally liable to repay the debt if the company is not able to.

So what are the pros and cons of incorporating your business?

Significant advantages:

• Limited liability status - as explained above, the company is a separate legal entity and this can protect your personal assets from business creditors if for any reason the company is unable to clear all of its debts and has to cease trading. Operating as such is especially useful if there are significant risks associated with your business activity.

Significant disadvantages:

• Possible double taxation - the company pays corporation tax on its profits and can only distribute the remaining profits, known as retained profits, to directors and shareholders. This can give rise to tax being paid by both the company and by the directors or shareholders when they extract money from the company.
• More cost - the professional costs for setting up the company and for preparing company accounts and tax returns can be higher than those you would expect to pay if you were self-employed.  There are then additional costs involved with various Companies House requirements
• Audit requirement - If your company exceeds certain turnover limits, or is in a particular trade sector, an audit may be required thus incurring further costs. We can advise on this, but most small companies will be exempt from annual audits.

PLEASE NOTE: There have been changes to the Companies Act affecting Limited Companies - click here to read more....

Needless to say, choosing the right business entity is not always an easy decision.

We are more than willing to discuss your individual requirements and undertake a proper risk assessment thus enabling you to decide on the best way forward for your enterprise.

Whether you proceed as a limited company or as an unincorporated business, our assessment will indicate the most beneficial tax arrangements available to you and help you to make sensible choices about how you can minimise your commercial risks.

• Limited Company Considerations
• Small Business Rate Relief
• National Insurance Contributions
• New PAYE Penalties
• Emergency Budget 2010
• New HMRC Inspection Powers
• The Budget 2010
• Company Voluntary Arrangements
• Don't Miss The January Tax Deadline
• The New Tax Health Plan
• January 31st Tax Return Deadline
• Pre-Budget Report 2009
• VAT Cut: Success or Failure?
• Starting a Business in a Recession
• October 31st Tax Return Deadline
• Tax Scheme might cause harm
• Tax tips to help firms during downturn
• Tax On Pensions
• Buy Local Campaign
• The Budget 2009
• HMRC Compliance Checks
• Updates to Companies Act 2006
• Direct Debits Improve Cashfow
• Pre Budget Report 2008
• Bank Charges for Business
• Debt Recovery Priority

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Over the past 10 years we believed that if we wanted outstanding service we should use traditional large accountancy firms. Oh how wrong we had been! We had been charged high fees without any real value being added to the business.
DAVE THOMAS
Bluegrass Consultancy Ltd

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