I've set up a limited company - But now what?
It's all well and good setting up a limited company, but what do you do once you've actually set up?
It's not always straightforward. There are things that you need to do now that you're a director.
Make the business a success
Now you're a director it's up to you to make the business a success. You need to use all your knowledge, skills, experience and judgement to keep the business running. It's also your responsibility to shut-up-shop if you can see the business entering a downward spiral you don't think it's going to recover from.
If you can see the business heading down to the point of no return then it is your responsibility to close it. This is done through liquidation. When the liquidation process is started a business has all of its assets frozen and sold. The proceeds of these sales are used in order to pay back any creditors that the business has. There are two types of liquidation that can occur. These are: compulsory liquidation and creditors voluntary liquidation. As these can be long and confusing they will be covered in full in another dedicated blog post.
Follow the rules
You may have started a business so that you could be your own boss and write your own rules. But you'll still have to abide by the rules set out in the business' articles of association.
The Articles will typically contain the following provisions:
- Appointing and Resigning Directors
- Issuing, revoking and re-denominating shares
- The duties, rights and liability of the members
- The powers granted to directors to execute documents and changes to the company
- The number of directors required to serve the company.
- The decision making process, e.g. how meetings are convened and voting conducted.
- All other administrative matters affecting the company
For more on the Articles of Association check out this guide.
Dont be selfish
You now need to make decisions based on what the company wants and needs and not just yourself. You may want to have a company car, but can the company afford this big expense? Just the same as you may want to employ a second person in the company, but can the company produce enough work for them and will it be able to pay them? Sometimes you have to be realistic with your wants and expectations. Remember, your company has only just been formed, walk before you can run.
Be open and honest
If something is happening in the business that you will personally benefit from, then you need to tell your shareholders. If, for example, your company stocks toys and you had shares in your friend's company that made toys and you were brokering a big deal that could mean your shares will go up as well as the shares in your friends company, then you need to tell the shareholders of your company that you would be benefiting from the increase in shares in your friend's company.
Confused? Don't worry. In simple terms, if you are going to benefit personally from something your company is going to do, then admit it to your shareholders.
There are different correspondences between Companies House and HM Revenue and Customs that you will need to keep. It's usually best to keep all of these for at least 6 years, however individual documents can vary and it's best to do your own research regarding this. But for more information on the types of documents you should be keeping check out our previous blog post on record keeping.
Check your figures and correctly report them
In gov.uk's own words:
Make sure the company's accounts are a 'true and fair view' of the business' finances.
So what do they mean by this? Well check your figures before you report them and make sure they are accurate before filing them along with your company's tax return.
Pay your taxes
All active companies have to pay Corporation Tax, which is currently 20% of the company's profit.
Alongside this, you may wish to become VAT registered. As VAT is its own little ball of fun why don't you check out this post for more information on the in's and out's.
Register to pay your taxes
Because tax doesn't have to be taxing, you also have to register for Self Assessment and then fill out your Self Assessment Tax Return every year - unless you are a non-profit organisation such as a charity and you're not getting paid or receiving other benefits. If you're unsure on whether you'll have to register, we recommend to either speak to your accountant, or to HMRC themselves.
Once you've done all this you'll be a legally complying director, or you can cheat and hire an accountant to do it for you and guide you through it. However, even if you do hire an accountant to take care of it, you're still responsible for anything they do, so check everything.
If you would like to hire an accountant but aren't sure who to choose then check out our sister site FindAnAccountant.co.uk.
All references to current legislation are correct at the time of writing, and should only be used as a guide. We recommend seeking professional advice before acting on the information in this article.
- 31 Jul 2020 - Tips to Open a Business Bank Account in the U.K. for your Limited Company
- 24 Jul 2020 - Mistakes that can Kill Small Businesses
- 20 Jul 2020 - Developing a Cashflow Forecast
- 30 Jun 2020 - Using Cashflow Forecasts for Small Businesses
- 28 May 2020 - Starting a Business During the Coronavirus Lockdown