Limited Companies made easy
11/06/2008 send to a friend
In a number of his features on Enterprise Nation, our much-liked in-house accountant Alan Young has referred to the benefits of being a limited company, as opposed to self-employed. So what does this involve? Is it more work or more expensive? Will you have to have an audit, register for VAT or find a company secretary? No, says Alan, as there’s been some simplification.
Nice and Simple
The latest Companies Act has completed the task of simplifying the limited company process, by, amongst other things, removing the requirement to have a company secretary, from 1 April this year.
Other recent simplifications include:
- The audit requirement for small companies has been removed for companies whose turnover is below £5.6 Million.
- The requirement to have two directors has also been removed.
- Limited companies were previously required to have at least two shareholders. This was, in reality, a bit of a pointless exercise, anyway, as business owners would simply issue 100 shares, 99 to themselves and 1 to their partner.
The net effect of all of this is that, from April this year, it’s now possible to form and run a limited company with just one person, without the need to involve anyone else. The structure of the business, therefore, becomes as simple as that of a sole trader.
The other benefit of this is in the costs involved. The fact that most of us will never require an audit, will significantly reduce accountancy costs, and the simplified company structure means that you can now form a brand new limited company online from as little as £25. Lovely!
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Comments
Author: Shailesh Doshi
Date: 12/06/2008
Comment: The new information about limited companies made easy is really very useful to me and very encouaging to start a new business without having audits or nominating another director as shareholder.This step has come when experienced entrepreneurs like me find it flexible to strat a business in U.K.
Thanks a lot,
Yours truly,
Shailesh Doshi
Website:
Author: Alan Young
Date: 12/06/2008
Comment: Thanks for the comment.
Glad you found it useful. Things really are a lot simpler than most people think these days, and it does mean you have all the benefits of limited company status, such as lower tax bills and limited personal liability.
Alan
Website: www.1staddition.co.uk
Author: Tom Reader
Date: 12/06/2008
Comment: Very useful article - thanks Alan.
Sounds like there really aren't many reasons *not* to become a limited company these days.
Website: http://www.alvervalleysoftware.com
Author: Bill Kruse
Date: 12/06/2008
Comment: Many will now ask, whither now the sole trader? What's the point?
BB
Website: http://www.kruse.co.uk
Author: Alan Young
Date: 13/06/2008
Comment: Good question Bill.I
In most cases, the only reason for going sole trader is the simplicity of doing the accounts, if the profits are very low.
If, for example, the business only turns over £10,000 a year, and generates £4,000 profit (with no intention to increase these levels) it could be easier to be a sole trader (as long as the limited liability aspect is not an issue for you)
In this scenario, because the turnover is below £15,000, we are not required to produce full accounts for the Inland Revenue. All we are required to do is to complete three boxes on the Tax Return; Turnover, Expenses and Profit.
Also, the £4,000 profit is below our tax free personal allowances, so the tax savings of a limited company will not be a factor (unless this is a second income).
So, the general guideline is; if your turnover is below £15,000, and your profit is below aboout £5,500, then sole trader is a sensible option. For anyone else, limited company is likely to be the way to go.
Website: www.1staddition.co.uk
Author: Lisa Corcoran
Date: 13/06/2008
Comment: Good article! It's really useful having the detail of forming a company explained in 'simple' language.
Thanks Alan
Website: www.travel-notebook.net