This huge figure shows more people than ever are creating their own business and choosing to become an entrepreneur.
Out of these, many choose to operate as a limited company because it’s a business structure that works best for them, both financially and on a practical level.
However, it isn’t simply a case of registering and starting to trade – there are some things you need to make a note of first. With your registration of a limited company comes a number of responsibilities you must adhere to.
These consist of financial duties, legal responsibilities and more general duties which cover the day-to-day running of the businesses and how you interact with your employees.
A limited company is a private company. The main difference between the formation of a limited company and registering as a sole trader is that for the owners and shareholders of a limited company, the amount liable is equivalent to the original amount invested. A limited company is incorporated through Companies House and limits personal liability either through shares or by guarantee.
Who is the company director?
Usually, you’ll know if you’re the company director. You will have accepted the position and been formally appointed. However, if you are have a certain amount of influence over a company you may be treated as a director in specific circumstances – even if you haven’t been appointed as such.
While you may choose to outsource your accounts to an accountant, it’s ultimately you that the responsibility lies with, which is why having clear lines of communication with your accountant is vital.
These responsibilities are:
Keep accounting records
It’s your duty to ensure your accounting records are kept. They must be well-organised so your company accounts can be prepared for them. Your company accounts need to be a true representation of the financial state of your business, which is why keeping your accounting records in good order is so important.
Submit accurate accounts
You must submit accurate company accounts and file them by the deadline with Companies House.
Submit a corporation tax return
You must submit a corporation tax return – the CT600 form – to HMRC and pay any liabilities you owe.
It’s your duty to ensure your company’s employees are paid correctly and on time – this includes paying yourself! This responsibility includes deducting the correct amount of income tax and national insurance contributions, as well as any other deductions that may apply.
Meet financial responsibilities
Essentially you have to meet all of these responsibilities and ensure your company is solvent, and trading as such. You must make sure you meet any financial liabilities your company owes.
As well as the financial responsibilities, which if you fail to meet could result in a hefty fine, there are also a number of legal responsibilities limited company directors must abide by.
As company director, you must file a Confirmation Statement each year, to then be submitted to Companies House.
Register of Persons with Significant Control
You must produce a Persons with Significant Control (PSC) register. This is to be filed as part of the Confirmation Statement and filed with Companies House. It’s your duty to keep this up-to-date.
Notify Companies House of changes
It’s not just changes to the PSC register you will have to tell Companies House about. It’s also your responsibility to notify them of other changes, such as if you change your registered company address.
Act in the interest of shareholders
The director of a limited company must also act in the interest of the shareholders, and must not use the company in their own interests if it is ultimately detrimental to the company itself.
There are seven general duties limited company directors must abide by, which were set out by the Companies Act 2006.
Act within powers
This simply means that directors must comply with the company’s constitution and exercise your powers within the business only for the reason they were given.
Promote success of company to benefit members
Essentially your position as company director means you have to pay regard to relevant matters. This covers in particular:
Long term consequences of any decision
Company employee’s interests
Business relationships and the impact of community operations on the environment
Need to act fairly between company members and desirability of company’s reputation for high standard of business conduct
Use independent judgement
You should use your own independent judgement to make the decisions you are required to. While you can heed advice from others, you must use your own judgement to decide whether it’s in the best interests for your company to follow it.
Exercise reasonable skill, care and diligence
You must ensure you’re well-informed about company affairs. If you have a skill that’s relevant to your business, for instance if you own an accounting firm and are a qualified accountant, the expectations of how well-informed you should be will take this into account.
Avoid conflicts between director’s interests and company’s
If the director and the company have different interests on a matter, there could be the potential for conflict. You should look to avoid these cases, although this will not apply if the company consents – and if the consent meets the formal requirements.
Do not accept benefits from third parties
If a third party offers a benefit because you’re a director of the company, or because you have certain powers as a director, you should not accept these, although the company as a whole may accept these.
Must declare interest in any proposed transactions/arrangements
Before any transaction takes place you must declare any interest you have in it – this applies to indirect and direct interests.
Additional duties of directors include:
Keep company’s affairs confidential
To act in the interest of creditors, an consider them – particularly when there is a chance of insolvency
What happens if these responsibilities are breached?
Under the Companies Act 2006 directors can be liable if they do not carry out some of these responsibilities effectively. The most prominent of these that many directors fail to do is make the correct filings with Companies House.
Have you just started your own company? Or are you looking to register your business? Talk with our friendly team about how you can keep on top of your financial responsibilities with the help of one of our accountants. Give us a call on 020 3355 4047 or email firstname.lastname@example.org.