Working as a limited company is now the most popular choice for contractors, freelancers and consultants. One of the main reasons for this is because it's often the most tax efficient way of managing your finances. But it's not all plain-sailing: the administrative burden involved with a limited company can be hard work.

 

Accounts Direct are specialist accountants for contractors, freelancers and consultants. We’ll relieve you of the hassle involved with running a limited company so that you can get on with making your business profitable.

 

What is a limited company?

 

  • Liability of those involved is limited to their investment in the company
  • Even if a limited company is wholly owned by you, it is legally distinct from yourself
  • Allows you to pay yourself a combination of director salary and dividends

 

 

What are the benefits of a limited company?

 

  • Tax efficiency. Legally save on tax; retain more of your profits.
  • Low liability. Your business’ and your own personal financial and tax affairs remain separate. Any liability or loss is the company’s, not yours.
  • Kudos. Gain instant credibility from being a company director. Plus, some organisations work exclusively with limited companies.
  • Established name. Because your company must register at Companies House, the name of your business legally belongs to you.
  • Moving on. If you decide you want to sell your company and move on, it’s easily done.

 

 

Your responsibilities as company director

 

Legally, a limited company requires at least one director. If you’re setting up your own business, that director will likely be you. There are great rewards to being a director, but huge responsibilities too. That’s why it is imperative to have experts such as Accounts Direct onside.

We’ve compiled a brief guide to what is expected of you as company director, or alternative or additional company directors.

 

Appointing your director

 

This initial step sets a precedent for your company. Note that the director must be a person; another company does not qualify.

  • It’s recommended you come to a mutual agreement on the appointment of the director with any shareholders involved. Even if you’re the only person up for the role, this will set a good standard.
  • A new director or additional directors can be appointed at any time, provided this adheres to your Articles of Association. Companies House must be informed within 14 days of new appointments.
  • Not everyone is eligible to become a director. 16 is the minimum age of appointment. Other non-eligible candidates include auditors for the same company, undisharged bankrupts and those who have been disqualified for previous conduct.
  • If a director is to be appointed for a period longer than 2 years, this must be officially approved by shareholders.

 

 

Directors’ powers

 

It is important to know what rights and limits there are regarding what directors can do within the company. These are defined in the company’s Articles of Association.

  • Directors must adhere to the Articles of Association at all times.
  • A satisfactory degree of skill and care in the role of director must be proved.
  • If the company was established on or before 1 October 2009, directors have no restrictions unless the Articles of Association states otherwise.
  • Companies established prior to 1 October 2009 will have listed their objectives in the Memorandum of Association. Such objectives are now part of the Articles.
  • Acting outside objectives can lead to legal action against directors.

 

 

Fiduciary responsibilities

 

It is vital that as company director, you effectively manage and balance the interest of shareholders, employees and various other groups, along with the reputation of the company as a whole.

  • Directors must always consider the effects of a decision on everyone – no matter how big or small their role in the company – before putting it into practice.
  • Directors are not entitled to make any personal profit from the company. Similarly, if a conflict of interest arises, this must be declared.

 

 

Responsibilities under company law

 

It is the responsibility of the directors to ensure their company is functioning within its own laws, and law in the wider sense. That means:

  • Filing statutory returns with the Registrar of Companies.
  • Filing accounts with Companies House, and officially recognising personal responsibilities regarding the company’s accounts.
  • Holding AGMs when requested to do so by 5% or more of members.
  • It is illegal to continue running a business while incurring debts when possessing no reasonable plan for paying salaries or delivering on customer promises. As director, you must ensure this does not happen. You must also place appropriate values on your assets.

 

 

More legal duties

 

Aside from those mentioned above, there are additional legal duties you must adhere to as director. These include:

  • Making sure the company is working in line with the latest employment laws
  • Retaining fair work practices
  • Ensuring health and safety among all employees
  • Ensuring tax, VAT and NIC are paid

 

 

Personal liability and penalties

 

Know that there can be serious consequences for you as director personally for illegal acts or debts within the company. Consequences could include disqualification from being a director, or even criminal conviction. Ways to avoid such things are:

  • Keeping a close eye on company finances
  • Taking expert advice if the company is in financial trouble
  • Keeping minutes of all directors’ meetings
  • Arranging suitable liability insurance

 

Next Step:

Please contact us if you need further advice, have any questions about our services, would like a free consultation.

Speak to us today. Call: 0333 5775 332 or Email: info@account-direct.com

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