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There are various commercial structures available for those who are starting a new business and the decision is usually based on a number of factors.

These include the type and size of the enterprise, the experience of a business owner, and the time available. Usually the choice falls between a sole trader, a partnership or a private limited company, the latter of which will now be looked at in more depth.

Advantages and disadvantages

There are benefits and pitfalls to all business structures and each person will have their own preference. Someone who has never owned a business before or only intends to trade on a small scale may prefer to set up as a sole trader. However, there are many benefits to a limited company as well, although there is more paperwork to deal with.

Incorporation of your company

Your business will only be officially recognised as a limited company when it has been incorporated. To do this, you must register with Companies House, a process that can be done by post, online or through an agent.

Once you have been incorporated, or registered, you will be given a certificate of incorporation by Companies House, showing the Company Registration Number and the date it occurred.

HMRC

You must also inform HM Revenue and Customs (HMRC) of the decision to start a limited company. A Unique Taxpayer Reference will be issued to the company at the registered office, usually just after the company has been incorporated.

Register for the online services of HMRC so that you can file your Company Tax Returns, accounts and Corporation Tax calculations. Once you have registered for the online services, you will be given a user ID for the Government Gateway and a password.

Responsibilities

Once you decide to set up a limited company, you need to appoint at least one director who will be responsible for the company accounts, tax return, and making sure that everything is submitted and paid in a timely manner. Company accounts have to be submitted once a year, along with profit and loss accounts, a balance sheet, auditor’s report and a director’s report.

Deadlines

Corporation tax for companies with a profit below £1.5m is payable nine months and a day following the accounting period end. The deadline for filing a tax return is normally twelve months after the end of this period. A notice to file will be sent to the company stating the deadline, with any that are missed incurring a penalty.

Although it is possible to obtain information from HMRC, it is advisable to seek advice from an accountant.

 

Still unsure about limited companies? See our guide, here.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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