{"id":4087,"date":"2019-05-29T08:31:55","date_gmt":"2019-05-29T07:31:55","guid":{"rendered":"http:\/\/www.cheapaccounting.co.uk\/blog\/?p=4087"},"modified":"2026-01-08T07:50:21","modified_gmt":"2026-01-08T08:50:21","slug":"are-you-ready-to-be-a-director-2","status":"publish","type":"post","link":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/are-you-ready-to-be-a-director-2\/","title":{"rendered":"Are you ready to be a director?"},"content":{"rendered":"

Are you ready to be a director?<\/strong><\/span><\/h4>\n

Setting up a limited company is very cheap to do and has become an easy option for many to adopt when starting their own business.<\/p>\n

Being a director brings with it certain duties and responsibilities. Are you ready for that? Let\u2019s explore what you need to know.<\/p>\n

Perception<\/strong><\/span><\/h4>\n

All too often the perceived importance of owning a limited company sees business owners jump right into the formation of this separate legal entity. The title of director has a certain gravitas but is a limited company the right choice for your circumstances?<\/p>\n

Deciding on a business structure is one of the most frequently asked questions by any new start up.<\/p>\n

There are several types of business set up, the main two types being:<\/p>\n

    \n
  • Limited Company<\/li>\n
  • Sole Trader (partnership if more than one person)<\/li>\n<\/ul>\n

    What does the structure mean?<\/strong><\/span><\/h4>\n

    Operating as a limited liability company means that your personal assets are protected<\/em> if the business fails, unless of course you have given personal guarantees against any debts. The debts are limited to the company and not you as a shareholder.<\/p>\n

    With a sole trader business you are personally responsible for the debts of the business and your other assets, e.g. your house, could be used to settle the debts of the business.<\/p>\n

    Regulation and legislation<\/strong><\/span><\/h4>\n

    Regulation, legislation and control surrounding limited company status, e.g. Companies Acts, filing accounts, registering the company etc, are far more onerous than that of a sole trader business.<\/p>\n

    A sole trader is easier to operate with less formality<\/em>.<\/p>\n

    In almost all circumstances the regulation and legislation surrounding a limited company means that an accountant is required to complete the statutory accounts and corporation tax returns. Many operating as a sole trader can complete their tax returns themselves as they are much more straight forward.<\/p>\n

    It\u2019s vital to make sure that you have enough funds available for the services of a reputable accountant to ensure that your regulatory responsibilities are met; see below.<\/p>\n

    Tax<\/strong><\/span><\/h4>\n

    At profits in excess of circa \u00a330,000 there can be tax savings associated with operating as a limited company.<\/p>\n

    Profits from the limited company can be taken in the form of dividends<\/em> with the benefit being that no national insurance is due on the dividends.<\/p>\n

    For a sole trader income tax and Class 2 and 4 national insurance will be due on the profits.<\/p>\n

    It\u2019s always worth carrying out some projections to ensure that you\u2019re aware of the taxes that you would pay whether operating as a sole trader or a limited company.<\/p>\n

    Importantly, the projections should be refreshed on a regular basis and at least annually as things can change.<\/p>\n

    Losses<\/strong><\/span><\/h4>\n

    As you establish your business you might be working elsewhere to keep income coming in whilst it builds and gets off the ground.<\/p>\n

    There may be costs incurred during the setup of the business that mean a loss is made in the first year(s).<\/p>\n

    Take this as an example.<\/p>\n

    Mrs D is setting up a business but will still be working whilst the business gets off the ground.<\/em><\/p>\n

    She needs to spent money on setting up a web site, stock, stationery etc and expects that she will make a loss in the first year of trading and move into profitability in the second year.<\/em><\/p>\n

    In this situation it may be worth starting the business as a sole trader as losses from the sole trader business<\/em> can be offset against her income from her job.<\/p>\n

    So she may get a tax refund<\/em>!<\/p>\n

    Worth thinking about.<\/p>\n

    Accounts and Reporting Requirements<\/strong><\/span><\/h4>\n

    For a sole trader the accounts and reporting requirements are very straight forward.<\/p>\n

    All that is needed is a set of accounts and a self assessment self employment supplement (known as an SA103) each year.<\/p>\n

    As a limited company you will have a number of filing duties<\/em>. Missing a filing deadline can result in heavy fines and penalties<\/em>.<\/p>\n

    For a limited company the filing duties are:<\/p>\n

      \n
    • Annual Statutory Accounts in a certain defined format<\/li>\n
    • Annual Confirmation Statement<\/li>\n
    • CT 600 corporation tax return<\/li>\n
    • Self assessment for directors<\/li>\n
    • PAYE for directors including RTI returns<\/li>\n
    • Making Tax Digital VAT returns where applicable<\/li>\n<\/ul>\n

      With regulations often changing having the paid help of an accountant is essential to make sure that you do not fall foul of any laws or rules.<\/p>\n

      Limited Company or not?<\/strong><\/span><\/h4>\n

      Only you can decide which structure will suit your circumstances<\/em> best.<\/p>\n

      However this may be something you would like to discuss with your accountant or business advisor at the start.<\/p>\n

      Make sure that you know what you are getting yourself into so that there are not any great surprises later.<\/p>\n

       <\/p>\n","protected":false},"excerpt":{"rendered":"

      Are you ready to be a director? Setting up a limited company is very cheap to do and has become an easy option for many to adopt when starting their own business. Being a director…<\/p>\n","protected":false},"author":1,"featured_media":13384,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1067,1033,959],"tags":[515,517,516],"class_list":["post-4087","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-to-review","category-1-about-accounts-and-tax","category-all-posts","tag-are-you-ready-to-be-a-director","tag-setting-up-a-company","tag-sole-trader-or-limited-company"],"_links":{"self":[{"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/posts\/4087","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=4087"}],"version-history":[{"count":5,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/posts\/4087\/revisions"}],"predecessor-version":[{"id":5589,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/posts\/4087\/revisions\/5589"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/media\/13384"}],"wp:attachment":[{"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=4087"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=4087"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cheapaccounting.co.uk\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=4087"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}