Running a limited company: tips and traps for start-up businesses

The last 12 months have seen a spike in new businesses being formed, despite the recent challenges some may have faced. Starting your own limited company is an extremely exciting conquest for new or existing business owners.

Whether you want to add a new level of professionalism to your current business image or establish a legal identity from the get-go, there are multiple reasons why running a limited company has advantages over the regular sole trader.

At Sunny Accountants, we pride ourselves in assisting start-up businesses, helping them lay strong foundations to cement a solid business plan. In this blog, we cover some of our specialist advice on how to form and run a limited company successfully:

How to set up a limited company

There are various aspects to consider when setting up a limited company. Here are just a few of the actions you must take:

  • Choosing an original company name
  • Deciding on your company officials
  • Selecting your shareholders and share structure
  • Preparing a Memorandum of Association: these are documents that say how you will run your limited company

Responsibilities of a limited company

You should consider whether a limited company is right for you and the responsibilities that come with it.

Sole traders are easier and quicker to set up with very few legal responsibilities. However, they are less tax-efficient and have unlimited liability if things go wrong.

Whereas limited companies tend to be more tax-efficient as you pay Corporation Tax through your business, and pay yourself in salary and dividends.

However, limited companies have more legal responsibilities and administration to keep on-top of. Not only this, information about your company, from directors to earnings, will all be available online through Companies House.

Some of the additional measures include registering for Corporation Tax within three months of running your company. Plus, you will need to register to HM Revenue & Customs (HMRC) as an Employer if you are paying anyone a salary. You may also need to register for VAT.

It is important that you choose the right accountant for your business to ensure that such responsibilities, from tax to filing obligations, are all administered carefully.

If uncertain on which business structure best fits your business, this is a good time to seek Sunny Accountant’s professional advice.

Seeking finance for start-ups

Some companies may need to give their business an extra boost when starting out. Fortunately, HMRC has introduced the Seed Enterprise Investment Scheme (SEIS), offering tax relief to individual investors who buy shares in small, early-stage companies.

Accounting and bookkeeping for new entrepreneurs

HMRC can impose penalties of up to £3,000 for failing to keep adequate records to support a tax return or claim.

Keeping an up-to-date record of your financial data will not only help you stay compliant with HMRC but will provide important insight into your business performance.

Monitoring financial health

Letting financial planning slip can be a troubling habit for new business owners. Ultimately, the success of your business depends on how well you manage its finances. It is crucial to learn about each aspect of your company’s finances, anticipating both rough patches and more profitable periods. If this is something you need advice on carrying out, it may be helpful to seek professional guidance.

The importance of managing cash flow

The money that moves in and out of your business is something a lot of small businesses struggle with. Though, it is vital that you pay close attention to it to avoid a negative cash flow. Whether it’s sending invoices out promptly, chasing up late payments, or closely monitoring your debts and savings, there are various methods to avoid this as a limited company owner.

For more advice on running a limited company, download our free guide to Starting your own business or contact our expert team today.


Posted in Blog.