Home Budget 2007 Company Profile Services Accountancy Zone Business Zone Tax Zone IR35 Update News Articles Feedback Search Legal Notice How To Find Us A limited company is one which has been formally incorporated, and therefore has the right to call itself "limited". If the company becomes insolvent, the liability of the shareholders is limited to their share capital, including any uncalled capital. The liability of the company itself is unlimited. A limited company has a legal ownership of its own, distinct from the shareholders who own it. However, the Insolvency Act 1986 has rules which could make incompetent or fraudulent directors liable for debts if the company faces insolvency. Companies can invite direct equity investment in their shares to raise capital for the business. All forms of business entity can raise loans but usually individuals will have to provide guarantees for them. This tends to weaken the position of limited liability if things go wrong, and the business guarantor should beware of putting the family home up as security for business loans. On the death of a shareholder, the business can continue on its own. The level of business formality is much higher for limited companies and a certificate of incorporation is required before trading can commence. If turnover exceeds £350,000, a full audit is required. If the turnover is less than this amount there is no legal requirement for an audit so long as the company has approval from 90% of its shareholders and assets of less than £1.4 million. Directors will be taxed in line with PAYE rules if drawing a salary from the business. All trading information has to be disclosed to Companies House annually and filed, but there are exceptions to this rule. Small companies, for instance, need only file an abridged balance sheet if they wish. The company itself needs to be legally formed, through a solicitor or accountant, or it can be purchased from a registration agent and adapted by changing its name, articles of association, memorandum and the shareholders themselves. The limited company must have at least two shareholders and one of these must be a director. It must appoint a company secretary, who can be an outside person and who is neither a shareholder nor a director. Since 1992, companies have been subject to a tax system known as Pay and File, Under this system, a company is expected to make and pay its own estimate of its corporation tax liability by the normal due date, nine months and one day after the end of the accounting period. Corporation tax rates for the year ended 31 March 1999 remain the same as for the previous year (31% main rate, 33.5% marginal and 21% small); and to 31 March 2000 the main rate has been reduced to 30%, the marginal rate to 32.5%, the small rate to 20%. Profits include both income and capital gains. For more information on our audit capabilities and approach click here. For on-line company registrations, access to Companies House forms and domain name registration go to our home page. [ Tax Zone Home]