A limited company is a separate legal entity from its owners. Most small businesses set up as limited companies. The term ‘limited’ derives from the fact that the company’s finances are distinct from the personal finances of their owners (unlike the sole trader arrangement): The higher level requirements for limited liability companies are as follows:

• The Company must be registered at Companies House
• Annual accounts must be filed at Companies House
• An Annual Return must be completed each year to update Companies House with basic details relating to the company, and there will be a small annual fee.
• HMRC must be informed if the Company has any profits or taxable income in a Company year.
• The Company must complete an annual HMRC corporation tax return and pay the due taxes within nine months of the company year-end on an annual basis.
• Anyone employed by the company must pay income tax and national insurance on their income.

Shareholders in limited liability companies are not responsible for company debts, although if required, directors may be required to guarantee loans or credit granted to the company.

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