Today’s economic environment promotes businesses to run through a registered entity such as a limited company, especially when it comes to tech and IT-related businesses. Working with a registered company may be more official and streamlined, but there are several regulatory requirements that must be fulfilled. However, more importantly, before you decide to register a company, there are some key factors to take into account which we will discuss in detail below.
First and foremost, you must ask yourself why you’re registering a company. if it is truly necessary for you in your profession to operate through a registered company, then, by all means, you should choose to register. However, if you’re just registering so you “look more official” then it’s a waste of time. Running a company is subject to regulatory requirements that have to be fulfilled on a periodic basis. Be ready to deal with lots of paperwork if you decide on it.
The next factor you should consider is whether you have the money to put into your company’s accounts. As a registered entity, you’ll have to show (and have) a minimum amount of money to assure regulators you can run the business. While the minimum prescribed limit might be a lot less than you actually need, chances are your regulator will consider the nature of your business and ask you why you don’t have the adequate capital as per industry practice.
The compliance requirements are also something to keep an eye on. As a limited company, you’ll have to periodically and constantly file returns, intimate regulators for certain activities, submit annual accounts, and fulfill many other requirements depending on the type of limited company you register and nature of business you operate. Not fulfilling such requirements will more than likely result in fines and penalties, which is why you need to stay vigilant. If you choose to delegate then you need to ensure the individuals are responsible enough to fulfill these requirements.
As a shareholder and director of a limited company, at all times you will need to act in accordance with the articles of association of the company. Furthermore, as a director, you may also have individual compliance requirements towards your regulator, one example being the self-assessment and yearly tax returns to Her Majesty’s Revenue and Customs. You may also be liable if your fellow shareholders and directors fail to comply so make sure you partner up with reliable people who are able to fulfill these requirements.
There is no doubting that through a limited company, you enjoy a lot more benefits than you would as a sole trader. You get to define your image through an official channel, operate your business in a tax-efficient manner, and are able to approach bigger entities more easily. However, there is no such thing as a free lunch, and to enjoy these benefits, one needs to pay a price. In this scenario, the price is yearly filing and document submission, constant compliance with rules and regulations, and working only within the boundaries of your company’s memorandum and articles of association.