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When starting a business, you can set up as a sole trader, partnership or a limited company. There are advantages and disadvantages to each type of business structure, but the main advantage of forming a limited company is that you will have a limited liability which protects your personal assets in the event of anything going wrong.

When you form a limited company, you have specified responsibilities and obligations to both HM Revenue & Customs and Companies House. A number of forms must be filed by relevant deadlines and all members of the company must remain compliant with the Companies Act 2006.

A private limited company must have at least one company director who will have specified responsibilities. Shareholders are the owners of the company, while directors are responsible for running the company and making decisions that will benefit the company. Although an accountant or other qualified person may be hired to deal with the administration of the company, the director remains responsible for all documentation being prepared correctly, accurately and being submitted to Companies house and HMRC in a timely manner.

A director will use their judgement, skills and experience to benefit the company rather than themselves. If a director is likely to benefit from a particular course of action or deal, they must inform the shareholders of the company. When the company is registered with Companies House, the articles of association must be in place. This document will set out rules which have been agreed by the shareholders and officers of a company and must be adhered to. A director must follow the rules as set out in the articles of association.

All company records must be kept by the director, or if someone else prepares records, the director maintains responsibility for their accuracy and submission. On a personal level, a director has to register with HMRC for self assessment so that they can complete and submit a self assessment tax return annually, declaring all income received.

There are three ways to take money from the company as a director; dividends, a salary with expenses and benefits or a directors’ loan. To be paid a salary, the company must be registered as an employer with HMRC, with a PAYE scheme. Deductions of income tax and National Insurance must be made from the salary, benefits or expenses and paid to HMRC in a timely manner. If sufficient profit is available, the company can pay dividends to the shareholders. The dividend must be declared at a directors’ meeting and minutes of the meeting have to be kept, even if there is only one director. A directors’ loan is made when a director is taking out more money from the company than has been paid in, unless by dividend or salary. Specific rules have to be followed when making a directors’ loan.

If there are any changes to a company, the director is responsible for informing the necessary bodies. Prior to changing the registered office address, the director must inform Companies House. If the change is given approval, Companies House will inform HMRC. There are other changes which must be reported to Companies House, including the appointment or cessation of a company secretary, changing where business records are kept and the personal details of company directors. There are some changes which must receive approval from shareholders before going ahead.

There are so many responsibilities of a company director that outsourcing is usually the best option. However, it is important to remember that the company director has final responsibility according to the law for all business records and remaining compliant with Companies House and HMRC.

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