Limited Company Director - Responsibilities

This article was provided for Bytestart readers by HfM Tax and Business Services

Separate Legal Entity

It is important to be clear that you and the company are separate legal entities.

If you were previously self-employed then you will have to make some significant mental adjustments, for example:

• You can no longer just withdraw money from the business without thinking about how you are going to treat it (see Extracting Money From a Limited Company) and being aware if the implications.
• The legal issues are different so, for instance, starting and closing a company is more complex and there are tax and accounting issues to consider at these points

You have to produce accounts that will be more complex than you may be used to producing as a sole trader (depending on the size of the business).

You have a legal responsibility to:

• Keep good accounting records from which accounts can be prepared which give a true and fair representation of the financial position of the company
• Produce accurate accounts, filed at the due time with Companies House
• Submit corporation tax returns to HMRC and pay any tax due
• Deal properly with the payment of staff, deducting tax and national insurance as appropriate and paying it to HMRC by the due date
• Trade solvently, ensuring that you are able to pay the liabilities of the business. To fail to do this is to commit an offence.

Apart from the financial responsibilities mentioned above, there are other legal responsibilities for the director, such as:

• Completing and returning the annual return (form 363)
• Acting in the interests of the company shareholders. This means that the directors cannot enrich themselves in a way that damages the company.

You can read more on this issues at the Companies House website and we strongly recommend that you read these through if you have not done so already.