Registering as a Limited Company

[will7]

Well, recently I have been considering setting up as a Private Limited Company. I am quite knowledgable in business but still have a few questions:

1) When I register, how would tax go? Would I only be taxed on profits made from the Limited formation date or from all profits before that as well?

2) What does the secretary need to do? Because I need one, could I just make my mom the secretary and give her a 1% share in the company and me a company director with 99% share?

3) Is using an online registration company such as www.uk-plc.net a good option and will it all be legal?

4) Someone told me that, if I was to become a Limited COmpany (Private or Public) then I could sign legally binding contracts on behalf of the company (as a company director) even though I am under 18. Is this true?

If you think there is anything else I need to know, please tell me! Thanks guys!

Will.

 

[autolycus]

1) When I register, how would tax go? Would I only be taxed on profits made from the Limited formation date or from all profits before that as well?

The company pays tax (corporation tax) on its profits. The company only exists once it is incorporated, so no corp tax is due prior to the date of incorporation.

If you are already running your business in non-Ltd form (i.e. as a sole trader) then you will be taxed personally on trading profits up to the point where you go Ltd.

2) What does the secretary need to do? Because I need one, could I just make my mom the secretary and give her a 1% share in the company and me a company director with 99% share?

See: http://www.advice4businesses.co.uk/company_secretary.shtml

NB - it is not a requirement for the secretary to hold any shares in the company.

3) Is using an online registration company such as www.uk-plc.net a good option and will it all be legal?

Don't know that particular company, but it is generally an idea to use a formation agent of some sort. As long as they are reputable then yes it will all be legal.

4) Someone told me that, if I was to become a Limited COmpany (Private or Public) then I could sign legally binding contracts on behalf of the company (as a company director) even though I am under 18. Is this true?

You yourself do not become a limited company. A Ltd company is a totally seperate legal entity.

There is no minimum age to be a director (except in Scotland) but I don't know if the contracts are legally binding if you are under 18. Having said that, I have never seen a business contract that asks for the director signing to state their age.

HTH,
Dave.

 

[will7]

Thanks. I know there is no minimum age for being a director, but I am wondering if I can sign contracts on behalf of the company (as it is a seperate entity) and then they are legally binding?

Also, is there any more information I should know?

 

[bwglaw]

Anyone under the age of 18 do not have the legal capacity to contract. That is to say that you cannot enter into legally binding contracts personally. Without checking, I believe this applies to signing contracts as a Director for the Company. When someone signs a contract under the age of 18 it can often void the contract.

I need to check if there is a minimum age to be a Director in view of the above difficulty. In this case there should be. Can a 15 year old be a Director, even a 10 year old. Obviously not, need to check on that.

On the other points. Yes, correct that you will be taxed on the profits. If your profit is less than £10,000, you are likely not to pay any tax.

You may wish to consider being a LLP (Limited Liability Partnership). Talk to an Accountant. If you are going to incorporate then its wise to have a good Accountant on board because there will be more paperwork!

Company Secretary can be anyone. I would use an Accountant or a Solicitor if you don't have anyone close to hand. Using your mother may not be best practice in case of difficulties. Being a Director and a Shareholder are two different roles, but someone can be both or either.

Thanks. I know there is no minimum age for being a director, but I am wondering if I can sign contracts on behalf of the company (as it is a seperate entity) and then they are legally binding?

Also, is there any more information I should know?

 

[woopi]

Hi Will,

I'm in the same boat as you.

I'm seventeen and I'm getting off my feet business-wise. I'm treated as a joker until people hear me out, b'cus the world of business is a little bit age-prejudice (or very much so in the industry my company is in).

I used ukplc.net very happy with their fast service. If you order before 4pm, you get the company registered the same day (they have an allocated VPN between each other).

My family's legal friend who happens to be someone major in UK law, says that I (and u) are both responsible for something we sign, if we have intent of executing the contract statements.

If you sign something on behalf of your company (If you are the director...), your company is tied to that contract, whether you are 12yrs old or 100yrs old.

You are taxed on everything in your profits **that you record in your books**.

It's pretty helpful to have a bank account in your business's name ;-) - you'll need a certificate of company incorporation from ukplc.net first. Go for the cheapest option with ukplc.net , you don't need the certificate, all they do is print it out on a piece of paper and send you a load of junkmail.

I recommend Alliance and Leicester Commercial Bank is what i recommend - free banking (you'll appreciate the _Free_ part of that).

Don't fall for a free-for-18-months trap. You'll be paying a 12.99 /mo banking charge after the 18months is up.
A&L CB are completely free (except for cash deposits, where they take 20p per transaction if you deposit more than £1k cash/mo).

Best regards,
Woopi

 

[woopi]

Oh, I forgot, I recommend getting a form 225 from companies house, once you are registered, and align your yearly accounting to the end of march

 

[Toon]

I used UK-PLC when setting up my business and everything went smoothly.

 

[VeryMark]

Don't forget to check out the name you will trade under - Companies House will accept almost anything as long as it's not identical to another company name, but anything confusing similar to an existing trade mark will infringe.

 

[David Harris]

2) What does the secretary need to do? Because I need one, could I just make my mom the secretary and give her a 1% share in the company and me a company director with 99% share?

3) Is using an online registration company such as www.uk-plc.net a good option and will it all be legal?
Will.

I have used uk-plc many times they are fast reliable and also cheaper than anyone else.

The company secretary has legal functions and responsibilities relating to the operation of the company. He/she will be liable if these are not properly performed. Your mother might not appreciate this liability
see:
http://www.bcentral.co.uk/startingup/formingacompany/the-company-secretary.mspx

 

[BMS]

Hi Will

Lot uf usefull advice here so take your time and digest it is my advice.

"You are taxed on everything in your profits **that you record in your books**. " writes Woopi,

this is true and I'm not going to interpret the remark any further another than there are a number of ways legally that you can reduce CT tax liability.

 

[will7]

Apparently, because I am an employee of the comapany (being a director), I have to be paid and the company must operate a PAYE system and I must get a National Insurance Number.

What's all that about? I have no idea what a NI Number is or how to get one. Any help on this one?

 

[TargetTesting]

Will, I belive NI numbers are issued automatically before you reach 16.

In terms of an PAYE system, if you have an accountant they will be able to sort this out for you.

Regards
Bill

 

[VeryMark]

It is my understanding that if, as well as being a director, you are the owner as controlling shareholder in a limited company, you can take money as dividends as well as or instead of a salary - dividends being preferable since you pay less tax and have to account less frequently.

 

[TargetTesting]

This is an approach that can be taken and you can save a lot in taxes. This is the approach that a large number of IT contractors took and have since been caught out by IR35...Some have been ordered to pay back large sums of money (10s of 1000s) or be charaged with tax avoidance.

That said the rulling might not apply to Will depending upon how the business is operated but it's worth speaking to your accountant about it

Regards
Bill

 

[BMS]

The secret is to get the right balance of salary and dividends.

 

[VeryMark]

I believe IR35 ought only to be a worry if you are doing all your work just for one or two customers.

 

[TargetTesting]

In my experience it is more about how you work with your clients in practice and how you run your business that counts rather than how many clients you have over a period of time or at any given time.

I only mentioned IR35 as Will is going to be a small IT service company and a prime target for the IR. BMS is right you need to strike the right balance and proffessional advice should be sought.

Regards
Bill

 

[Twistmedia]

Might be of interest to someone - http://www.anewbusiness.co.uk/frameset.htm

 

[Pilfo]

Will7 wrote:

Apparently, because I am an employee of the comapany (being a director), I have to be paid and the company must operate a PAYE system

Obviously, you can't pay yourself a salary/dividends if there is not enough money in the company to cover this.

Pilfo

 

[BMS]

Hi Pilfo

Obviously this is the case.........

 

[autolycus]

This is an approach that can be taken and you can save a lot in taxes. This is the approach that a large number of IT contractors took and have since been caught out by IR35...Some have been ordered to pay back large sums of money (10s of 1000s) or be charaged with tax avoidance.

That said the rulling might not apply to Will depending upon how the business is operated but it's worth speaking to your accountant about it

Regards
Bill

Taking a low salary and high dividends does not in itself make you liable for additional tax under IR35. It is the nature of the working relationship with the client which counts, taking into account things like direction & control, the need for personal service, and mutuality of obligation.

Taking a low salary just means that if you are deemed to be caught by IR35 then the amount of back tax owing will be higher than if you had taken less in dividends and more as salary.

 

[autolycus]

I believe IR35 ought only to be a worry if you are doing all your work just for one or two customers.

IR35 is assessed on a contract by contract basis. Therefore, you could have only one client and not be caught by IR35 if the working relationship was correct.

Or, you could have 100 clients and find that your earnings from two of them were deemed to be caught by IR35 and the earnings from the other 98 were not.

See www.pcg.org.uk for more info.

Dave.

 

[fastfences]

With reference to NI Numbers, you need to make an application at a Social Security office. I am not sure though, if they are 'sent out automatically' because various identity information is sought before they are processed.

Mine is an owner/operator 'limited' company and my accountant's advice was to register my NIN, as I recall, because payment of salary is taxed at a lower rate than company tax. I'm sure you can receive more precise info. from an accounting expert. Cheers, Nigel