How to run a limited company
Starting a limited company is a great step to grow your business! But, there are some important practical steps you need to take to make sure your company is run the right way.
Responsibilities of a limited company director
As a limited company director you have certain responsibilities. But, that doesn’t mean you have to do it all yourself. If you want to hire people to manage these responsibilities you can, but it is still you who is legally responsible.
- File accounts and your Company Tax Return
- Pay Corporation Tax
- Follow the rules in your company’s articles of association
- Keep records and report changes
- Be transparent with shareholders if you personally benefit from a company transaction
It’s really important to know that if you don’t follow any of the responsibilities you can face fines, or risk being prosecuted or disqualified.
Read more about starting a limited company
What limited company records do you need to keep?
As the director, you need to keep records on several aspects of your limited company. These include:
- Directors, shareholders, secretaries
- Results of shareholder votes
- Debentures: a promise to repay loans including the date they are due and who you are paying)
- Indemnities: a promise to pay if something goes wrong and the company is liable
- Transactions when shares are bought
- Loans or mortgages secured against company assets
- If records are kept in a different location to the registered office address
Keeping a PSC register
PSC are ‘people with significant control’ in your company. You need to keep a register of these people including their details. Significant control in your company means that someone:
- Has over 24% of shares or voting rights
- Can appoint or remove a majority of directors
- Has influence or control over your company
Even if you have no PSC in your company, you need to have a record of this fact.
Paying dividends
As a limited company director, you are responsible for paying our dividends to shareholders if the company makes a profit. Usually, you pay dividends to all your shareholders. Dividends are normally paid annually.
Read more about paying out dividends and dividend tax
Reporting company changes
There are certain changes within your company that you need to tell Companies House about.
- Registered office address. This needs to be approved and registered by Companies House before it is officially changed
- Business contact details
- Personal or trading address
- Appointing an accountant or tax adviser
- Record keeping address and which records you keep
- Directors and any change to their personal details
- PSC
- Issue more shares
There are some changes that shareholders need to approve before you can make them. This can be done by shareholder voting. The changes include the company name, articles of association or removing a director.
What is a confirmation statement?
A confirmation statement lets Companies House know that the information they have about your company is correct.
Before sending your statement, you need to check these details:
- Registered office
- Directors and secretary
- Address where your records are kept
- SIC code
- PSC register
- If your company has sharers, the statement of capital and shareholder information
If your statement of capital, shareholder information or SIC codes have changed, you can report this in your confirmation statement.
Any other changes of officers, registered address, PSC or where you keep your records need to be filed separately.
You need to pay to file your confirmation statement. It costs £13 online, or £40 by post. You will be notified when your confirmation statement is due.
Keeping accounting records
There are specific accounting records that you need to keep as a limited company. This can be done by yourself or an accountant, but ultimately you will be legally responsible for the records.
You need to keep accounting records for 6 years from the end of the financial year. However, you may have to keep them for longer if the transaction covers more than the company’s accounting period, you send your tax return late, or HMRC is doing a compliance check.
Your records need to include:
- All money received and spent by the company. This includes documents like grants, support scheme payments, receipts, cash books, invoices, contracts, bank statements.
- Assets
- Debts
- Stock owned and stocktaking
- Goods bought and sold, and who you bought and sold them to
- Records and calculations needed for annual accounts and your Company Tax Return
How to prepare annual accounts (statutory accounts)
Statutory accounts are prepared at the end of each financial year. You need to share them with Companies House, HMRC as part of your Company Tax Return, your shareholders and anyone who attends your company general meetings.
Your accounts should include:
- Balance sheet
- Profit and loss report
- Any notes on your accounts
If you are a ‘micro-entity’ you don’t need to submit a director’s report, or an auditor’s report. A micro-entity is a company that fits 2 of the following criteria:
- 10 employees or less
- Turnover of £632,000 or less
- Balance sheet amount of £316,000 or less
Tax as a limited company
As a limited company, there are some specific taxes that will apply:
- Income tax and National Insurance contributions (personal to you as a director)
- Corporation tax
There are other taxes that may apply to your business in certain circumstance:
- Capital Gains Tax
- Dividends tax
- VAT
Read our complete guide to taxes and rates to find out more
Accounting software for limited companies
Using an accounting software is the perfect way to keep the records you need as a limited company.
Bokio is accounting software that lets you do your bookkeeping, invoicing and manage your finances in one place. Our automated reports include the balance sheet and profit and loss sheet you need to file your annual accounts. Bokio is Making Tax Digital compliant, so you can submit an automated VAT Return to HMRC in just a few clicks.
We make managing your finances simple so you can get back to running your business.
