FAQ’s Setting up a UK Limited Company
Do I really need a limited company?
The majority of businesses are not companies. The reasons for having a company are varied, for example, it could involve ownership of property, obtaining investment funds, taxation or contractual relationships. Many businesses function satisfactorily as sole traders or partnerships.
The key point to recognise is that a company is a separate entity.
- This means that it is a legal entity in its own right
- It is separate from those who own or run it, and
- Has ‘limited liability’.
- It attracts its own liability to taxation through the corporation tax system.
The differences in the taxation rates for corporation tax as compared to the personal tax system allowing owner managers the option of low salary/high dividend as a low tax bearing scheme is not always what it seems. For example, major problems may arise over the ownership of motor vehicles. There is no substitute for good professional advice. What does limited liability mean?
Limited liability gives the owners of the company (its shareholders) protection if the company fails. This means that if a company is put into liquidation, the people who own the company will only be ’limited in their liability’ to pay what they have already paid or agreed to pay towards settling its debts. This is normally the par value of the already issued share capital.
Can anyone be a director?
The members (shareholders) of a company select the board of directors. Generally anyone over 16 years old can be a director with the following restrictions:
- The person must not have been disqualified by a court from acting as a company director (unless has been given leave to act by a court for a particular company);
- The person must not be an un-discharged bankrupt (except with leave of the court); and
- For a PLC or their subsidiaries, anybody over the age of 70 unless specifically approved by a general meeting of the company
What can I do with an unwanted company?
Sometimes people make a mistake when forming a company or what seemed a good idea never materialised and never commenced trade. In these circumstances you may apply to the registrar through Form DS01 for the ‘striking off’ of the company along with the £10 registrars’ fee. Once again good professional help should be sort.
If you decide that you do not need a company that you have traded with you can put it into voluntary liquidation. You could apply for it to be struck off the register once its liabilities have cleared.