One of the main considerations that a business owner must keep in mind when trying to decide if they should apply to become a limited company is tax payments that will then be due. Freelance limited company tax will include corporate tax and may also include capital gains tax in some instances. Tax of course is just one of the factors that must be taken into consideration and another one is how they will receive money. Once a business becomes a limited company, the owner cannot withdraw money from it as they wish, they can only receive money at the same time as other share-holders and that is by dividends that are approved by the company’s director. The director though, is under strict regulations as to when they can give dividends and one of those regulations state they cannot be given if the company is not showing a profit. There are not just strict regulations governing what a director of a limited company may or may not do, there are also strict regulations as to exactly what accounting procedures must be followed. Among the rules for accountants is the need for them to keep both an up to date balance sheet, plus a profit and loss account. Obviously with every limited company having to keep the same accounts in the same way, they are easy for bankers or investors to understand but perhaps more importantly than them is the fact that the tax collectors can also understand them.
With strict accounting procedures to be followed, keeping track of all wage stoppages for PAYE and of course any other expenses including any expenses that the director may authorize for themselves. As the boss, obviously a director has some say in what they may claim as expenses but unfortunately for directors, the tax departments only accept certain things as being eligible as legitimate expenses.
Many businesses do opt to become limited companies and one of the reasons for that is that they can invite others to become share-holders and thereby raise funds for the expansion of the business. Once a business has become a limited company, the owner or director, may want to consider taking out different insurances for the company which will have now been referred to as a corporation. There are several options for insurance and all of them should be carefully studied to ensure that the company is adequately insured against any eventuality, in fact share-holders may insist on it.
If a business owner does decide that they want their business to become a corporation, a limited company, they will have to register with Company House and on doing so; they will need certain information to hand. Firstly the limited company must have a name and it must also have one main address. They will also have to give the name of the director and the name of the company’s secretary. If the business is small, often the same name is given for both positions.