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Having your very own UK Limited company can provide one with many advantages as compared with simply being a sole trader. For one thing it does give potential consumers the feeling thst s Limited company is a more substantial undertaking than just a one man band. How ever having a limited company does bring with it very considerable responsibilities and requirements that cannot be ignored. One of the key reasons why business people trade through a limited company is simply because it has "Limited Liability". The liability of Directors and Shareholders liability is Limited to the amount unpaid on any shares that he has subscribed for. For example you can issue say 1000 £1 shares and if a shareholder pays £500 then these shares would be 50p part paid. So if the company ceased to trade the most the share holder would need to pay is the amount unpaid on their shares and in this example that would be £500. If all the shares that he owns are paid for in full then he will have no additional liability for the company's debts should these exceed the assets of the company. All the assets and liabilities of the company belong to the company so that the personal assets of shareholders nor that of the directors' assets can be used on behalf of the company's debts or liabilities. Of course this does not mean that the Directors can be in anyway reckless in their trading activities and they do have very considerable responsibilities. Directors have to act at arms length with the company at all times. These are some of the other advantages in having a UK Limited liability company. A Limited company is a separate legal entity and it is one that will survive despite the death of its shareholders whose heirs will inherit the shares. If the directors resign or die the share holders can appoint new directors. A Limited company will have an issued share capital and this can be divided between people working together or to provide an incentive for key employees. Shares can be issued of different classes and rights. This can give considerable planning opportunities in providing income and capital for family members. Whilst a Ltd company has many advantages there are also many responsibilities to do with filing accounts and returns at the Registrar of Companies. For example you will need to file annual accounts at the Registrar of Companies and submit an Annual Return. The Annual return shows the current directors, secretary and share holders. There are very generous exemptions for small companies as regards the details required so an audit is not required and most companies will only need to file a balance sheet not a profit & loss account. Some notes to the Accounts will be required but usually these will fit on to one page so all that is required is two or three pages. To claim these exceptions both from an Audit and as a small company it does require the director to sign a certificate on the accounts themselves. If accounts are not filed in time which is 9 months (previously 10 months) after the year end for financial years beginning on or after 06 April 2008. The company will incur an automatic penalty of £150 which increases progressively geared to how late the accounts are. The penalties are - one month late or less then the penalty for a private company would be £150 and £750 for a public company. more than one month late and less than three months the penalty is GBP 375 and for a public company some £1,500.00. more than three months late but less than six months then the penalty is £750 and £3,000.00 for a public company. more than six months late the penalty is GBP 1,500 and GBP 7,500 for a public company. There is a mighty sting in the tail in that if you are unlucky enough to file accounts' late twice on the trot the fines are doubled. This applies when accounts' are filed late under the Companies Act 2006; and the accounts for the previous year were late and that they were for accounting year beginning on or after 6 April 2008. This date is important as it is from that date that this applies as those accounts will be under the Companies Act 2006. A private company files accounts which are less than one month late then under the Companies Act 2006 they will incur a penalty of £150.00. In the next year, the same private company files accounts that are 2 months late then under the Companies Act 2006 the normal penalty would be £375 but as this is the second successive time for that private company being late if filing this set of accounts and the company will then incur a penalty of £750. If the accounts are not filed after some time the company may be struck off the register by the registry of companies how ever before taking such drastic action they will write to you and give notice of their intention. When they do it you have to move quickly to bring the public file up to date. Also companies like Experian a credit reference agency will be informed and they will advise their clients as appropriate. For example they may have a client who you trade with on a regular basis and they may ask a credit reference agency to advise them of such things. Your client will no longer wish to trade with you in these circumstances as it would appear that you will be ceasing to trade. The other problem can be the banks as they too will also ask to be notified if notices to strike off are filed in the Official London Gazette. If this happens you must bring the public file up to date very quickly as if the company is struck off then its assets will belong to the crown and the bank account will be frozen and no longer available. The Author writes many articles on reclaiming Income Tax in the UK and for further information one of his web sites is at UK Paye Reclaim
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