Questions and answers

1. What is a difference between self-employment and limited company?

In self-employment (or partnership in case of business partners) is a business run directly by an individual (partners). There is no legal separation between an owner (owners) and a business. The most important implications of this fact is that any assets and profits belong directly to the owner. Unfortunately also any financial obligations of a business are personal obligations of the owner without any limits. Another factor is the fact that the business can not be passed to another owner as an existing entity. Limited company (private or public) is a legal entity separate from its owners.

2. What are advantages of trading through a limited company?

There is a number of advantages of of trading through a limited company depending on individual circumstances. However the most important are:

- limited liability status – the main advantage of this status is that directors and shareholders normally do not have to pay liabilities of the company.
- legal separation of an owner and a business – a company and its owners are legally separate persons, for example company can be sold as existing entity.
- possible lower taxation than in case of self-employment
- more prestigious image

3. What are disadvantages of trading through a limited company?

- more obligations and paperwork – there are some legal obligations the directors have to follow, such as a number of reports that have to be submitted do Companies House and HMRC every year
- more expenses – unfortunately if you are not an accountant you have to hire one to prepare paperwork
- director's details accessible to public – directors details are available on Companies House website for a small fee
- possible double taxation in case of higher rate taxpayers assets of a limited company are not a property of directors/shareholders

4. What is difference between a director and shareholder?

Director is an officer of a company responsible for preparing and delivering documents, on behalf of the company, to Companies House, HM Revenue and Customs and responsible or fulfilling by the company its legal obligations. Normally directors are also responsible for day-to-day managing of the company. Failure to carry out some of these responsibilities can result in prosecution.

Shareholders own a company but do not run it (unless shareholder and director is the same person) and are not responsible for its obligati

5. Who is the company secretary?

The company secretary usually acts as the chief administrative officer of the company, leaving the directors free to concentrate on running the business. However, ultimate responsibility for ensuring the company is properly administered remains with the directors.

There is no legal obligation for a private limited company to have a company secretary. However every company has to have two officers (at least one director, who is individual).  Usually we act as the company secretary for our clients.

6. What is the registered office?

By law, every company must have a registered office. The company secretary - if you have one - is usually responsible for establishing and maintaining it - it's the company's address for formal communications.

The registered office must be a real address, but it doesn't have to be the place where you do business. For example, some companies use their accountants for company secretarial services, and the accountants' address as their registered office. PO Box numbers alone are not acceptable.

We offer registered office service for our clients.

7. What documents must be submitted by directors on behalf of a company?

There is a number of documents that must be submitted on behalf of a company. Usually the directors are expected to submit every year:

- annual accounts to Companies House
- annual return to Companies House
- corporation tax return to HM Revenue and Customs
- employer's return to HM Revenue and Customs

8. What if I do not submit documents on time?

If some documents are not submitted on time the company may face financial penalties and directors can be prosecuted.

- annual accounts – late submission may result in penalties up to £1500 and prosecution of directors
- annual return – company can be stroked off and directors prosecuted
- corporation tax return – financial penalties and prosecution of directors
- financial penalties of £100 per month

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