Guide to running a limited company

1. Guide to Running a Limited
Company
Congratulations on forming your new limited company! We’ve put together some
of the key things you need to know about in order to ensure you make the most
out of your new business venture, keep within the rules and stay ahead of
deadlines.
What is a company?
A limited company is a separate legal entity from its owners. It can trade, own
assets and incur liabilities in its own right. Your ownership of the company is
recognised by owning shares in that company.
When a company generates profits, they are the company’s property. Should you
wish to extract money from the company, you must either pay a dividend to the
shareholders, or a salary as an employee.
The advantage to you is that you can have a balance of these two to minimise
your overall tax and national insurance liability. Companies themselves pay
corporation tax on their profits after paying your salary but before your dividend
distribution. Effective tax planning requires profits, salary and dividends to be
considered together.
There are additional administrative factors in running a company, such as
statutory accounts preparation, company secretarial obligations and PAYE (Pay
as You Earn) procedures. A big advantage of owning a limited company is that
your personal liability is limited to the nominal share capital you have invested.
Shareholders own the company
A company limited by shares must have at least one shareholder, who can also
be a director. There’s no maximum number of shareholders. Shareholders are
owners of the company and they have certain rights, e.g. directors may need
shareholders to vote and agree changes to the company.
How do shareholders get paid?
From 6th April 2016:
• The 10% dividend tax credit is abolished with the result that the cash
dividend received will be the gross amount potentially subject to tax.
• New rates of tax on dividend income will be 7.5% for basic rate taxpayers,
32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
• A new Dividend Tax Allowance will remove the first £5,000 of dividends
received in a tax year from taxation.
TaxAssist Accountants
Kingswinford &
Wolverhampton
01384 913888 &
01902 755557
Kingswinford@taxassist.co
.uk or
wolverhampton@taxassist.
co.uk

2. The table below shows a comparison between the pre and post 6th April 2016 tax rates.
Dividend falls into: Basic rate band Higher rate band Additional rate
band
Effective rate before 6th April 2016 0% 25% 30.6%
Rate from 6th April 2016 7.5% 32.5% 38.1%
Directors run the company
When you are appointed a director of a company you become an officer with extensive legal
responsibilities. For a director of an incorporated body, the Companies Act 2006 sets out a statement of
your general duties. This statement codifies the existing ‘common law’ rules and equitable principles
relating to the obligations of company directors that have developed over time. Common law had focused
on the interests of shareholders. The Companies Act 2006 highlights the connection between what
constitutes the good of your company and a consideration of its wider corporate social responsibilities.
The legislation requires that directors act in the interests of their company and not in the interests of any
other parties (including shareholders). Even sole director/shareholder companies must consider the
implications by not putting their own interests above those of the company.
The aim of the codification of directors’ duties in the Companies Act 2006 is to make the law more
consistent and accessible.
The Act outlines seven statutory directors' duties, which also need to be considered for shadow directors:
1. to act within powers in accordance with the company’s constitution and to use those powers only for
the purposes for which they were conferred
2. to promote the success of the company for the benefit of its members
3. to exercise independent judgement
4. to exercise reasonable care, skill and diligence
5. to avoid conflicts of interest
6. not to accept benefits from third parties
7. to declare an interest in a proposed transaction or arrangement
How do directors get paid?
As a director of a limited company, you can take money from the company in 3 ways.
1. Salary, expenses and benefits - If you want the company to pay you a salary, expenses or
benefits, you must register the company as an employer with HM Revenue & Customs (HMRC).
The company must take Income Tax and National Insurance contributions from your salary
payments and pay these to HMRC, along with employers’ National Insurance contributions.
If you or one of your employees make personal use of something that belongs to the business, you
must report it as a benefit and pay any tax due.
2. Dividends - A dividend is a payment a company can make to shareholders if it has made enough
profit. You can’t count dividends as business costs when you work out your Corporation Tax.
3. Loans - If you take more money out of a company than you’ve put in - and it isn’t salary or dividend -
it’s called a ‘directors’ loan.’ If your company makes directors’ loans, you must keep records of them.
There are also some detailed tax rules about how directors’ loans are handled.

3. Loans from the company to the director
If a 'close' company (broadly, one controlled by its directors or by five or fewer shareholders) makes a
loan to a shareholder, this can give rise to a tax liability for the company.
If the loan is not settled within nine months of the end of the accounting period, the company is required
to make a payment equal to 25% or 32.5% for loans made on or after 6th April 2016 of the loan to HMRC.
A loan to a director may also give rise to a tax liability for the director on the benefit of a loan provided at
less than the market rate of interest.
What is a company secretary?
The company secretary is an officer of the company. This means that they may be criminally liable for
company defaults, for example, failing to file a document in the time allowed or to submit the company’s
annual return.
There is no longer a requirement for all companies to appoint a company secretary. Private companies
(whose name ends in ltd) do not generally need to appoint a company secretary to deal with this
paperwork, unless they either wish to do so or their Articles of Association (their governing document)
requires them to do so.
The Registered Office
Your registered office address is where official communications will be sent, e.g. letters from Companies
House and HMRC.
The address must be:
• a physical address
• in the same country your company is registered in, e.g. a company registered in Scotland must have
a registered address in Scotland
You can use a PO Box but must include a physical address and postcode after the PO Box number.
You can use your home address or the address of the person who will manage your Corporation Tax if
these addresses meet the rules above.
Your company address will be publicly available on the register.
Completing and filing statutory forms
The company must ensure that their record at Companies House is always up to date and contains
current details of various statutory matters:
Company accounts Filed with Companies House. For a private limited
company, under normal circumstances, the filing
date for newly formed companies will be 21 months
from the date the company was set up. For an
existing company, they must be within 9 months of
the end of the accounting year.
A fine will be levied if the accounts are late.

4. Company’s tax return (form CT600) In most cases, the CT600 filing deadline is 12
months after the end of the period of account.
Corporation tax You must pay your Corporation Tax 9 months and 1
day after the end of your accounting period.
Company’s Annual Return
This is a snapshot of the information held by
the Registrar of Companies about the
company
Filed with Companies House within 28 days of a
given due date. If this information is returned late or
not returned at all, the company, director(s) and
secretary (if appointed) may be prosecuted.
If a company does not deliver its annual return the
Registrar might assume that the company is no
longer carrying on business and take steps to strike
it from the register.
The annual return is to be replaced by an annual
confirmation statement from June 2016 and the 28
days given previously to check and amend data will
reduce to 14 days.
All changes to the way the company is organised must be notified to Companies House. The most
common changes might include:
• changes in directors, secretaries and their particulars
• change of accounting reference date
• a change of registered office
• allotments of shares
The current version of the company’s Articles of Association is filed whenever a change in the company’s
internal rules is made.
Often this information must be filed at Companies House within a specified period of between 14 to 28
days following the change.
Corporation tax
From 1st April 2015 the main rate of corporation tax is 20% and it is proposed that this rate will continue
for the Financial Year beginning on 1st April 2016. The main rate of corporation tax will then be reduced
as follows:
• 19% for the Financial Years beginning on 1st April 2017, 1st April 2018 and 1st April 2019
• 17% for the Financial Year beginning on 1st April 2020
Signs, stationery and promotional material
Signs
You must display a sign showing your company name at your registered company address and wherever
your business operates. If you’re running your business from home, you don’t need to display a sign
there.
The sign must be easy to read and to see at any time, not just when you’re open.
Stationery and promotional material
You must include your company’s name on all company documents, publicity and letters.
On business letters, order forms and websites, you must show:

5. • the company’s registered number
• its registered office address
• where the company is registered (England and Wales, Scotland or Northern Ireland)
• the fact that it’s a limited company (usually by spelling out the company’s full name including
‘Limited’ or ‘Ltd’)
• If you want to include directors’ names, you must list all of them.
• If you want to show your company’s share capital (how much the shares were worth when you
issued them), you must say how much is ‘paid up’ (owned by shareholders).
There are different rules for what you need to include on invoices.
Charges
When a company gives security for a loan either the lender or borrower should notify Companies House
within 21 days, by filling in the appropriate form and paying the statutory charge. Without timely
registration the charge will be void - that is, the loan will still be repayable but the security given will not be
valid. This does not apply to property acquired which is subject to a charge.
Good company secretarial practice ensures that any charges created are registered and indeed the
company’s credit profile is protected by removing the charge from the register as soon as the loan is
repaid.
Meetings and resolutions
Company law sets out procedures for conducting certain aspects of company business through formal
meetings where resolutions will be passed. When resolutions are passed, the company is bound by them
(a resolution is an agreement or a decision taken by the members).
Here the company secretarial role would be to ensure that proper notice of meetings is given to those
who are entitled to attend, to minute the proceedings and to ensure that copies of resolutions which affect
the way the company is run are sent to Companies House within the relevant time frame.
Resolutions
There are two types of resolution that may be passed, ordinary resolutions (passed by a simple majority
of the members) or special resolutions (passed by a 75% majority of the members). In general,
resolutions will be voted on by any members present at a meeting.
Private companies can take most decisions by written resolution. Such a resolution does not require a
hard copy and can be passed by email. These resolutions however, need to be passed by a majority of all
members of the company, not just by those who return the voting form!
It is important that companies retain copies of all important decisions taken in the management of the
company where they are taken at a meeting or by written resolution. Where these decisions change the
way a company is run, a copy needs to be filed at Companies House.
Maintaining statutory registers
All companies must maintain up to date registers of key details, these include:
• a register of members
• a register of directors
• a register of charges
• from 30th June 2016, companies will need to complete a ‘People with significant control (PSC)’
register. A person with significant control is an individual who ultimately owns or controls more than

6. 25% of a company’s shares or voting rights or who otherwise exercises control over a company or its
management.
The details in these registers include, for example, names, addresses, dates of appointment and
resignation (for directors) and for members, the number and type of shares held. This is not an
exhaustive list.
These registers must be made available for inspection by the general public at the company’s registered
office or at a single alternative inspection location (SAIL) which must also be recorded at Companies
House.
A company may choose to keep its directors’ residential addresses private and to record a service
address for them. If so it will need to keep an additional register showing the directors’ residential
addresses which is not open to inspection by the general public.
How we can help
If you would like to discuss any of the issues raised above, please do contact us. We are able to provide
comprehensive assistance with company secretarial matters such as:
• the maintenance and safekeeping of the company registers
• the processing and filing of dividend vouchers and minutes of meetings
• the preparation and filing of resolutions
• the completion and filing of statutory forms
• the filing of the annual accounts and company tax return
• filing online
For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of
publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss
occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm