Limited Companies

Starting a Private Company
 
There are broadly two types of private company:
 
Ø private limited company
Ø private unlimited company
 
A private limited company may be limited by shares or by guarantee.
 
Common Features of Private Companies 
In relation to set up and administration, a private company:
 
Ø Must be registered (incorporated) at Companies House. You can register either via a paper
      application form or electronically using a third party with acess to the necessary software - eg
      an incorporation agent, software provider or solicitor. Alternatively, if you are a private
      company limited by shares which is adopting model articles in their entirety, you can
      incorporate your limited company online with Companies House.
Ø Does not have to appoint a company secretary but if one is appointed, this must be notified to
      Companies House.
Ø Must file it's accounts annually with Companies House. The accounts must be audited unless#
      the company is exempt.
Ø Must send an annual return to Companies House.
 
Both types of private company must also have atleast one member and atleast one director. The director - or the board of directors - makes the management decisions. Note that directors may also be shareholders.  Directors must notify Companies House of changes in the structure and management of the business.
 
Finance comes from shareholders, loans and retained profits. Any profits are usually distributed to shareholders in the form of dividends, apart from profits retained in the business as working capital.  If the company is active, it must tell HM Revenue & Customs (HMRC) that it exists and is liable to Corporation Tax. It must then pay any Corporation Tax that's due and submit a Company Tax Return to HMRC.
 
Companies also need to comply with HMRC's requirements for PAYE for employers, VAT, The Construction Industry Scheme etc.
 
Private Limited Companies
Limited companies exist in their own right. This means the company's finances are seperate from the personal finances of their owners.
 
A company may be limited by shares or limited by guarantee:
 
Ø a company is limited by shares if members liability is limited to the amount,
      if any, unpaid on the shares held by them.
Ø a company is limited by guarantee if members liability is limited to an
      amount the members agree to contribute to the company in the event of
      its being wound up.
 
For a company limited by shares, shareholders are not responsible for the company's debts unless they have given guarantees - eg a bank loan.
 
However, they may lose the money they have invested in the company if it fails.  Shareholders may be individuals or other companies.  However, shares cannot be offered to the general public.
 
Private Unlimited Companies
A company is an unlimited company if there is no limit on the liability of its members.  It May or may not have share capital.
 
Such companies are rare and usually created for specific reasons. It is strongly recommended you take legal advice before creating one.
 
Tax and National Insurance for Company Directors
Company directors are an office holder of the company and therefore regarded as an employee earner for the purposes of paying National Insurance contributions (NICs). As such, company directors must pay both Income Tax and Class 1 NICs on their director's earnings.
 
However, while regular employees' Class 1 NICs are calculated on their monthly or weekly earnings separately, director's NICs are calculated on an annual cumulative basis. 
 
Company directors must complete a Self Assessment Tax Return each year. You will need to give details of the income from your directorship on the employment pages. If you do not usually fill in a tax return you nust register for Self Assessment.