There are several options for business structure when setting up a business. You could choose:
- To be a sole trader
- To be the director of a limited company
- To form a partnership with another person
- To set up a limited liability partnership
If you have chosen the limited company structure you, as the business owner, will be a director of the company. As a director of a limited company the law says you are responsible for:
- Trying to make the company a succes using your skills, experience and judgement
- Following the company's rules which are set out in its Articles of Association
- Making decisions which benefit the company and not yourself
- Keeping company records and reporting changes to Companies House and HMRC
- Making sure the company's accounts records show a true and fair view of the business
- Submit a Self Assessment Tax Return every year
As a director you are legally responsible for the performance, the accounts and the records of your company even if you appoint someone else to help you do this. You will need to submit statutory accounts annually by nine months after your year end date and must pay corporation tax, if it is due, by nine months and one day after your year end date.
You can be fined, prosecuted or disqualified as a company director if you do not follow the rules.
You can draw money from a limited company by taking a salary, paying yourself expenses or benefits (you will need to be registered as an employer) or by takings dividends which can only be taken when there are sufficient profits available. Dividends are not an expense of the business.
Many new business owners will start their business as a sole trader. It is the simplest structure. Tax is calculated on profit (income less expenses) and all the profit (less tax) belongs to the business owner.