You have specific legal and financial responsibilities as a limited company director, which are known as the Director's Fiduciary Responsibilities. In layman's terms, this translates to the expectation of you as the director, to act within the best interests of those involved in your company such as the employees, clients, and stakeholders.
You are entrusted with the legal responsibility of running a corporation when you become a director. Even as the company's director, you are subject to a statutory code of conduct and must comply with specific legal requirements.
By starting a limited company, you are creating a legal entity that is distinct from yourself. It has its own legal framework and accountability, and whatever gains or losses it incurs are its own. As a result, you must manage the firm as if it were a different entity. Even if you're the company's sole director and shareholder, you must always behave in the company's best interests as aforementioned.
As a director, you must make decisions for the company's interest rather than your own. If you are the only shareholder, employee, and director, this may sound perplexing, but a move that benefits you personally may have a negative impact on the company's overall profitability.
A director's other responsibilities include adhering to labour laws and ensuring that a sufficient health and safety policy is in place for all employees.
There are numerous benefits to operating your business as a Limited Company. For instance, it's usually the most tax-efficient way to manage a business, and limited liability means your house and personal belongings aren't at risk should the business ever fail.
Contrastingly, there are some disadvantages that you should be aware of. Some of the more notable ones include; your personal and business information is disclosed on public record, including the fact that confirmation statements and annual accounts are to be submitted to Companies House every year.
Companies House and HMRC (HM Revenue & Customs) both require you to file different forms and returns. It can be difficult to know what to file and when to file such forms. We understand how this may sound very overwhelming but read on as we explain to you in more detail about what these responsibilities entail.
As a director of a Limited Company, what forms should you fill out?
There are many documents that should be filed and submitted to the right authoritative entities, this is notably one of the main disadvantages of being a director of a Limited Company. There is a lot to get through but we have simplified it for you so that the information is less overwhelming, here are the forms that must be submitted on time:
- Confirmation Statement
- Corporation Tax Payment
- Form CT600
- Employment Related Securities Return
- National Insurance
- Payment on Account
- Statutory Accounts
- VAT Returns
It is also important to take note that depending on your business and individual circumstances, you may have to report more than what is shown in the list.
When should these forms be submitted?
It must be made clear that companies who send their accounts late will receive an automatic fine, so employ better habits and methods to avoid this at all costs.
Neil Butler, a Business Liaison Manager at Companies House, stated:
“Every company must prepare accounts that report on the performance and activities of the company during the financial year. The financial year starts on the day after the previous financial year ended or, in the case of a new company, on the day of incorporation. Financial years are determined by reference to an Accounting Reference Period (ARPs). The financial period ends on the accounting reference date.”
If you wish to change the accounting period, refer to the online form provided by the UK government, but you must keep in mind that this change can only be implemented once every 5 years if you decide to extend it. On the other hand, there are no limits to shortening your accounting period.
To offer better visualisation of this, please refer to the examples below:
- Company Incorporated - 7 JAN 2015
- First Accounting Reference Date- 31 JAN 2016
- Company Incorporated - 23 JUN 2015
- First Accounting Reference Date- 30 JUN 2016
- Company Incorporated - 1 DEC 2015
- First Accounting Reference Date- 31 DEC 2016
Here at Persona Finance, we offer essential remote accounting services for different types of companies, including Limited Companies. Contact Persona Finance now at [firstname.lastname@example.org] for more business and accounting information.