Giving money to my new Limited Company

[Abbigail Grant]

Hi Forum!

I’ve recently joined after registering my business as a Limited Company. I’d like to routinely add funds to my business account form my salary at my other job while I build up my available funds in the business.

I’ve seen threads regarding Directors loans and a Directors Account and I just wanted a bit more clarity of what a Directors Account is and how I set one up, if that is even the correct term.

I was about to just write a document stating the amount I’d be giving to the company and the conditions of repayment and then just transfer the funds over but I’m not sure if this is the correct way.

Very much would like some education on the meaning of the above and how people usually go about funding their start-up business accounts themselves.

Thanks Forum!

 

[Scalloway]

I was about to just write a document stating the amount I’d be giving to the company and the conditions of repayment and then just transfer the funds over but I’m not sure if this is the correct way.

There is nothing wrong with that approach but I suspect a lot of people just pay money into the company bank account without documentation.

 

[fisicx]

All you need to do is transfer the money into the business bank account and record the income in the books. It’s what I did and got the money back in dividends.

Or…..

Just leave the money in your personal bank account and use it for the business when needed. You then just invoice the business to pay you back.

 

[Abbigail Grant]

There is nothing wrong with that approach but I suspect a lot of people just pay money into the company bank account without documentation.

This is quite true, thank you for taking the time to respond!

 

[Abbigail Grant]

All you need to do is transfer the money into the business bank account and record the income in the books. It’s what I did and got the money back in dividends.

Or…..

Just leave the money in your personal bank account and use it for the business when needed. You then just invoice the business to pay you back.

Ah yes I didn’t think of the second that’s so helpful. Thank you so much!

 

[DontAsk]

All you need to do is transfer the money into the business bank account and record the income in the books. It’s what I did and got the money back in dividends.

Why dividends?

Dividends come out of profit and have to be accounted for taxation. A director can just withdraw from the DL at any time with not tax implications (unless intersest is being paid).

 

[Abbigail Grant]

Why dividends?

Dividends come out of profit and have to be accounted for taxation. A director can just withdraw from the DL at any time with not tax implications (unless intersest is being paid).

Thank you. In my case, no interest is being paid so from what you said my understanding is that I can give the money in, make sure there’s a record and in time if I’d like to withdraw the funds this will come from the DL up to the amounts I had deposited.

This is very helpful!

 

[DontAsk]

Thank you. In my case, no interest is being paid so from what you said my understanding is that I can give the money in, make sure there’s a record and in time if I’d like to withdraw the funds this will come from the DL up to the amounts I had deposited.

Yes. Your accounting software should allow you to create a ledger for directors loan as a creditors, if it isn't there by default. This, along with bank statements, is a good enough record as far as I am concerned.

This is very helpful!

 

[Abbigail Grant]

Yes. Your accounting software should allow you to create a ledger for directors loan as a creditors, if it isn't there by default. This, along with bank statements, is a good enough record as far as I am concerned.

Ah amazing, I’m using FreeAgent so I’ll look into this as I think this would be the most suitable method for me. Much appreciated!

 

[Porky]

@Abbigail Grant
Very easy, pay in as often as you like but each time mark as Directors Loan. At end of the FY the totals of those loans will be what the business owes you and will show in your accounts as Directors loan of X.

You don’t need any special agreement unless you are charging interest or some other terms would apply to the loan.

Good luck

 

[Paul Kelly ICHYB]

Set the DLA up as a bank account on Freeagent, which will enable you to track payments easy.

 

[numbersrule]

All you need to do is transfer the money into the business bank account and record the income in the books. It’s what I did and got the money back in dividends.

If the company paid you dividends then the company would still owe you the outstanding director's loan.
More normally the company would pay back the director's loan before paying any dividends.
That way you personally would be taxed more efficiently.

Or…..

Just leave the money in your personal bank account and use it for the business when needed. You then just invoice the business to pay you back.

'Invoice the business to pay you back'?
If you personally incur an expense on behalf of the business then I suppose you would claim back the expenditure via an expense reimbursement.
In my opinion, if you personally invoice the business then that would make you self employed and there would be tax implications.
It would make far more sense to pay the funds into the business bank account, record it as a Director's Loan and then the business can take ownership of the purchase.

 

[Abbigail Grant]

@Abbigail Grant
Very easy, pay in as often as you like but each time mark as Directors Loan. At end of the FY the totals of those loans will be what the business owes you and will show in your accounts as Directors loan of X.

You don’t need any special agreement unless you are charging interest or some other terms would apply to the loan.

Good luck

Much appreciated, thank you for taking the time to reply

 

[Porky]

@Abbigail Grant
No problem, good luck with your venture. Don’t forget, if you are not already aware, that if you have a solid business plan and need to borrow a small amount of capital you can qualify for start up loan up to £25k on the British Bank scheme:-

Home Page

Whether you are looking to start up a business or want to grow, our Government backed Start Up Loans offer up to £25,000 alongside mentoring and support.

www.startuploans.co.uk

In my opinion you won’t find a better loan deal than this one anywhere and it’s fixed at 6% and includes mentoring support. Obviously it’s debt and you would be personally responsible for it and it takes a few weeks to arrange but it’s a very handy facility if you need start up capital.
Take care

 

[Abbigail Grant]

@Abbigail Grant
No problem, good luck with your venture. Don’t forget, if you are not already aware, that if you have a solid business plan and need to borrow a small amount of capital you can qualify for start up loan up to £25k on the British Bank scheme:-
In my opinion you won’t find a bet...e. This is great, very very much appreciated.