Dividends

[deskjet640c]

My company was formed this year and as part of that a single share of £1 was awarded to me.

Does that theoretically mean a £1 dividend has been paid out (to me) in that first financial year?

Regards.

 

[qul]

1) Probably not.
That £1 shareholding gives you a right to the ownership of the company. If the share capital of the company is only £1, then you own 100% of the company.

Dividends are payments per share out of retained earnings (the cumulative profits after tax each year).

So if you are the only shareholder, and the company made £100 of profit after tax, you could declare dividends of £100 per share. In which case, you would get paid £100 for your solitory share.


2) Just in case this a trick question, there could potentially be a dividend of £1:
if you haven't physically paid £1 to the company for subscribing to the share, then to avoid a debtor balance of £1 for unpaid share capital, in theory the adjusting double entry could be:
debit £1 to dividends
credit £1 to unpaid share capital.

 

[elaine@cheapaccounting]

No it does.

It means that you have been allocated one share - you need to pay the company £1 for this.

Dividends are proposed and paid by the directors to the shareholders.

May I suggest a read of ..

http://www.cheapaccounting.co.uk/blog/index.php/limited-company-–-paying-dividends-part-three/

This is about paying dividends.

Our limited company accounts guide may also be of use to you :

http://www.cheapaccounting.co.uk/guide.php

Good luck

 

[MyAccountantOnline]

My company was formed this year and as part of that a single share of £1 was awarded to me.

Does that theoretically mean a £1 dividend has been paid out (to me) in that first financial year?

Regards.

No it means you own a £1 share.

As, presumably, sole director and shareholder you can choose how much dividend if any you take out of the company subject to their being sufficient after tax profits to pay a dividend(s).

Dividends are simply the way a company pays out its after tax profits to its owners ie the shareholders.

Generally its best for most directors/shareholders of a small company to draw a combination of salary and dividends - have a chat with your accountant to get some specific advice on this to ensure you pay no more in tax than you need to.

 

[deskjet640c]

Cheers people.

Thanks for your help.