<\/p>\n
<\/a>There are about 5.7m SMEs in the UK, according to government figures<\/a>. Although most (3.4m) are sole trader businesses (AKA people who are self-employed) and 405,000 are ordinary partnerships, there are 1.9m private limited companies, about a third of the UK\u2019s total business population.<\/p>\n When they start a business, for various reasons, many people choose to set up a private limited company<\/a> (which is called \u201cincorporation\u201d).<\/p>\n A key reason is to mitigate personal financial risk. If you\u2019re a sole trader and your business fails, you\u2019re personally liable for its debts. Providing you do not trade recklessly or fraudulently, this isn\u2019t normally the case if you\u2019re the managing director of a private limited company, because the private limited company is a separate legal entity.<\/p>\n If you\u2019re considering setting up a private limited company, here are a few basic rules to ensure you get into good habits right from the start.<\/p>\n The limited company must have its own separate bank account, because it is a separate legal entity. Open a business bank account as soon as you register the limited company<\/a> with Companies House (the government agency that incorporates and dissolves limited\u00a0companies).<\/p>\n Don\u2019t mix them. Your bookkeeping will be quicker and easier if you only put company transactions through your business account. In fact, paying for private purchases out of the company bank account can create serious<\/em> tax problems, so it should be avoided.<\/p>\n And don\u2019t pay for non-business purchases out of the company account just because the money\u2019s there and it\u2019s convenient. Use your own money or debit\/credit card.<\/p>\n If you pay company expenses personally you are, of course, entitled to reclaim them back from the business. But try to avoid this as much as possible; get a debit card for the business account.<\/p>\n Where using your own money to buy things for the company is unavoidable, take the same approach as if you were claiming expenses from an employer. Detail the claim, either electronically or by writing it down; retain\/attach receipts (and the mileage log if relevant); and store safely.<\/p>\n Do the above regularly, so you don\u2019t forget any costs or lose receipts, which may mean you can\u2019t claim a legitimate expense against the business\u2019s Corporation Tax bill.<\/p>\n If you\u2019re using a credit card for business expenses, use it exclusively for the business \u2013 don\u2019t put private purchases on it. Also make sure that the card is paid off in full at the end of every month.<\/p>\n You\u2019ll need to analyse the amounts spent on the credit card across the business expense items (see below), because credit card transactions will often fall into different categories. Reclaim costs in the same way as for expenses paid personally (see 3).<\/p>\n This often causes confusion, but you can simply look at it as your private expenditure and make an expense claim for the business part. You\u2019ll need to have a sensible way of establishing how much the \u201cbusiness part\u201d is.<\/p>\n","protected":false},"excerpt":{"rendered":" There are about 5.7m SMEs in the UK, according to government figures. Although most (3.4m) are sole trader businesses (AKA people who are self-employed) and 405,000 are ordinary partnerships, there are 1.9m private limited…<\/p>\n","protected":false},"author":1,"featured_media":12798,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1067,1033],"tags":[],"class_list":["post-12794","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-to-review","category-1-about-accounts-and-tax"],"_links":{"self":[{"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/posts\/12794","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=12794"}],"version-history":[{"count":1,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/posts\/12794\/revisions"}],"predecessor-version":[{"id":12796,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/posts\/12794\/revisions\/12796"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/media\/12798"}],"wp:attachment":[{"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=12794"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=12794"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=12794"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}1 Open a company bank account<\/strong> as soon as possible<\/strong><\/span><\/h4>\n
<\/a>2 Keep business and private expenditure separate<\/span> <\/strong><\/h4>\n
<\/a>3 Avoid buying things for the company with your own money<\/span> <\/strong><\/h4>\n
<\/a>4 Don\u2019t use a company credit card for <\/strong>personal purchases<\/strong><\/span><\/h4>\n
<\/a>5 What if some costs are part business, part private<\/strong><\/span>?<\/span> <\/strong><\/h4>\n