Activating my dormant limited company

techguy81

A few years ago when I was starting up as a sole trader, I registered a dormant limited company. I am now planning to make the transition and activate this dormant company. Depending on who I speak to, some advantages I will gain are:

- First £10K profits tax free
- Ability to pay myself in dividends which also have tax benefits
- Less personal risk to myself
- A more professional sounding company name

As I understand it, I need to inform HMRC of the change with a form CT41G, open a bank account in the limited company's name and change all my paperwork to reflect the new name. I'm I missing anything out?

I was planning on going live at the start of the new tax year, is this a good idea?

Finally, at the moment I do all my own accounts and submit my own tax returns online which I am quite comfortable with doing. Will much change with regards to the accounts? I am not VAT registered and currently well below the VAT limit.

property.advert

I think the £10k a year tax free was only open for a few years before Stoopid Broon worked out that people would simply open more companies and have a tax free £10k from each one.

BryanSmallBiz

It is a complete myth that you have less personal risk to yourself by being a director of a limited company. True, as the shareholder of the business you have limited liability - however, as the director you are responsible in law for your actions and inactions. True, you can get directors' insurance and when you read the small print, you'll see that anything that seems to be too good to be true (like directors insurance) is just that.

InsideInsurance

It is not a complete myth at all but it is a reduction in risk rather than an elimination. If you are grossly negligent as a director then you can be pursued personally and of cause with small start ups some will want personal guarantees from directors because of the risk of the business just being folded to avoid debts etc

Premier_2

BryanSmallBiz wrote: »

It is a complete myth that you have less personal risk to yourself by being a director of a limited company. True, as the shareholder of the business you have limited liability - however, as the director you are responsible in law for your actions and inactions. True, you can get directors' insurance and when you read the small print, you'll see that anything that seems to be too good to be true (like directors insurance) is just that.

Directors are simply employees of the company and are treated mainly as such, although they do have some additional legal responsibilities (such as maintaining and submitting company accounts) but that does not extend to any financial liability (except in certain gross negligent matters, deliberate fraud, etc)

A limited company is just that; limited as to it's financial liabilities.

The usual time a director is personally liable for any financial liabilities is if they have given a personal guarantee for such amount.

toddle2u

The usual time a director is personally liable for any financial liabilities is if they have given a personal guarantee for such amount.

And also wrongful trading or trading whilst insolvent

property.advert

toddle2u wrote: »

And also wrongful trading or trading whilst insolvent

Which largely exists in the non Ltd world when bankrupt - so no huge difference there.

CKhalvashi

There are pros and cons to each. The one thing I don’t lke about Ltd is having my earnings splattered openly across the companies house website, which is one of the reasons why some companies, including this site, are no longer trading under limited liability.

With the more professional company name, again, I’d disagree. We simply went from (insert names here) t/a (insert business name) to (insert company name) t/a (insert business name) until last year, where we paid over the odds for (insert business name) (Europe) Ltd, as it’s quite a common name to want in the industry we’re in. We bought the Ltd from an investor who’d held it as a dormant for some time before we bought it.

It’s all to personal choice, but thats my opinion.

CK

Pennywise

Whilst there are "offences" of wrongful trading, negligence, etc. for which a director may be prosecuted, this is incredibly unlikely for the average small company.

Liquidators, the official receiver, HMRC etc., don't have the resources or the interest to go after small fry and even if they did, they wouldn't bother in most cases because they have to prove negligence or fraud or whatever which is very difficult.

It's only where a director's negligence has caused a death or serious injury (i.e. Health & Safety breaches), or where there is evidence of serious fraud (i.e. deliberately stealing company money), or the figures involved are huge (£100,000s) that a director may find themselves being prosecuted.

For the average director, running a small company to the best of his abilities, risks of prosecution or being found to be personally liable for company debts are tiny.

property.advert

CKhalvashi wrote: »

...The one thing I don’t lke about Ltd is having my earnings splattered openly across the companies house website, which is one of the reasons why some companies, including this site, are no longer trading under limited liability....

That is true but it isn't as open as a simple list of people and their salary or dividend or even shareholding and there are ways to mask it.

CKhalvashi

property.advert wrote: »

That is true but it isn't as open as a simple list of people and their salary or dividend or even shareholding and there are ways to mask it.

There are ways to mask it, but when profit is declared, a fair few people know that I own 60% of the company in question, which is where my problem lies.

There are many people that I’d rather DIDN’T know what I earn, including directors of companies we’ve owned in the past.

CK