Are you thinking of running a limited company? You may be aware that this comes with a lot of rules and responsibilities, but also a fair few myths.
Today, we are going to debunk the top 10 myths so you can run your business with confidence.
Myth 1 – Setting up a limited company is complicated and expensive
Registering for a limited company is actually pretty simple and usually only costs around £50 for an online application. All you need to do is register directly with Companies House and the process usually takes 24 hours.
When you register you will need to provide your company name, a registered office address, any details of directors and secretaries and information about shareholders and shareholdings.
Myth 2 – You must have a physical office
You do not need a shopfront or an office space to run your limited company. All that is required of you is a registered office address in the UK. This can be your home address, a PO box or a virtual address provided by an accountant or solicitor.
Myth 3 – You will pay more tax
Many people may assume that running a limited company means higher tax bills, but they are often more tax efficient. Directors will usually take a smaller salary and the rest as dividends, which can help reduce their National Insurance and overall tax.
Myth 4 – You don’t need a separate business bank account
While it is not legally required, having a separate business bank account is often a good choice. It can help keep your finances separate and simplify your bookkeeping by keeping everything all in one place.
Myth 5 – You are personally liable for company debts
One of the biggest benefits of running a limited company is limited liability. This means your personal assets are protected if the business is struggling, unless you have signed personal guarantees or acted improperly.
Myth 6 – You don’t need to file anything if your company is not trading
Even if your company is not trading, you still have responsibilities. You must continue to file a confirmation statement and dormant accounts with Companies House each year. The good news is that these filings are simple and inexpensive.
Myth 7 – You can’t run a limited company on your own
This is not true. A limited company can be run by just one person. You can be the sole director and the sole shareholder and have full control over the business. However, you must become a separate legal entity from the business and keep your personal finances separate.
Myth 8 – You cannot change your company name
You can, in fact, change your company name when you become a limited company, but there are requirements you must meet. You must have majority shareholder approval, check the name is available and file this with Companies House. Once they approve it and send you a certificate, you are good to go.
Myth 9 – You don’t need to worry about VAT till later on
If you can see that your taxable turnover is going to cross £90,000 in a 12-month period, you must register 30 days before this happens. If it happens unexpectedly, you will have to register within 30 days of the end of the month when it happened.
You might want to consider voluntary registration but double-check with a professional that it will benefit your business first.
Myth 10 – All your personal and financial details are public
Some of your companies’ information will be made public, but that does not mean everything else has to be. Your name and the month or year of your date of birth are visible, but your home address can remain private if you use a registered office or service address.
There you have it! Running a limited company can be more flexible and tax-efficient than you thought. If you want any further tips or guidance that is personal to your business, contact our team today.