What is a Limited Company?
A limited company is a business that is legally separate from the people that run it. The owners are often known as Directors.
Pretty much any company can be a limited company, and they can be limited by either shares or guarantee.
The legal obligations of a limited company is to complete a CT600 (your company tax return, also known as year-end accounts), which is filed with both Companies House & HMRC. The company information is publicly available on Companies House.
The owners of the limited company have legal responsibilities to complete. You can find out more about this on the Government website.
Highlights of setting up a Limited Company:
- There are legal responsibilities to comply with, such as filing a confirmation statement and company accounts.
- Size doesn’t matter – it can be small, simple setup, or a huge, complex company.
- You need to keep records of everything financial from the start.
- If sales turnover reaches the threshold, you’ll need to register for VAT.
- You submit the company’s tax return (CT600) to both Companies House and HMRC every year.
- Accounts can be submitted online, but you must register in plenty of time to receive your details, such as your authentication code.
- You pay income tax on the profit generated.
- It’s a Director’s responsibility to be honest with expenses claimed.
- You may need to make separate NI contributions if not on PAYE.
- You can hire employees (advice/insurance advisable).
- Sick pay and pension can be via PAYE.
- When there is cash in the business, you can’t just take it.
- You’re not personally liable, as the company is separate entity to the owner (except with personal guarantee).
- The company’s information is made publicly available on Companies House.
- Once the company is registered, no other business can have the same name.
- You must keep records for 6 years from the end of the last company financial year they relate to.
Considering being a sole trader instead? Read our sole trader overview.