Running a Limited CompanyFROM £39.00
A practical guide on the legal, accounting and tax compliance rules and implications on running a business as a limited company
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Fully updated for 2013 this new edition has been completely updated to take in to account significant amendments made to the Companies Act 2006 in relation to the appointment and powers of proxies and corporate representatives to attend company shareholder meetings, registration of charges granted by a company to secure its borrowings and company share buy-backs.It also includes changes in employment law and insolvency law. Chapter 13 also looks at the company’s need to use lawyers, accountants and bankers. It analyses the do-it-yourself versus buy-it-in decision, sets out the wide range of services on offer, and suggests how to get the most out of using professionals.
Note on the rating System
- What is a Company?
- The Company and its Constitution
- Shares and Shareholders in a Private Company
- Shareholders’ Agreements
- Directors and Other Officers
- Directors’ Meetings
- Shareholders’ Meetings (General Meetings)
- Contracts Binding on the Company
- Borrowing and Charges
- Using Professionals
- The Internet, Websites and E-commerce
- Strategy and Planning
- Further Considerations
"A valuable and easy to read book that safely guides the absolute beginner on the one hand and can still give some previous new insights to the more experienced reader on the other."German-British Chamber of Industry & Commerce
To read the full review click here
"Armed with the information contained in this book, you are better able to know which questions to put to your advisers, saving yourself both time and money. The key, say the authors, is knowing when advice is needed (before it is too late), and when it is not! Indeed, the book is a concise and effective survey of all aspects of running a company, from directors’ duties, accounting, taxation, strategy and planning though to insolvency."Phillip Taylor and Elizabeth Taylor of Richmond Green Chambers (published in The Report)
To view a video of the review click here
Reviews of Previous Editions
"...This text is a practical guide to those needing to be better informed of the legal implications of their functions and related business activities in the UK and elsewhere which have similar regimes."
"Like the traditional company law text, this manual guides the readers from birth or formation of companies to the point of insolvency. It is different beyond this. Foremost, the contents inculde materials not found in conventional company law text, like legal considerations when using the Internet to engage in ecommerce as in Chapter 14...."
"it is user-friendly where language and presentation are concerned but, above all, it is generally free of difficult legal jargon, case extracts, case commentaries and statutes other than a brief mention of the Companies Act 2006 and even then merely to stress that this seventh edition of the text takes into account the provisions of this important company law statue."
"this company law handbook is well worth its price. It will be particulary helpful to new entrants in business, small company operators at the various stages of the corporate life-cycle, and even to academics interested in the running or management of a limited company."
Business Law Review
"an excellent guide for directors and company secretaries of a private company limited by shares. It gives good overview of all aspects of the legal, accounting and tax compliance rules on running the company."German-British Chamber of Industry & Commerce
“an extremely practical text providing advice on regulatory, insolvency and accountancy issues … anyone involved in the running of a limited company should seriously consider buying it… is this really a text that you can do without?”Student Law Journal
“provides a useful reference point on all the major areas of concern”Director
“David Impey and Nick Montague’s best-selling manual arrives in the wake of the largest act of Parliament ever produced, the Companies Act 2006 …there are many important sections that should certainly be borne in mind by the officers or shareholders of a limited company … in addition to offering practical guidance on the implications of the new Act, the book also addresses the wider legal, accounting and tax compliance rules”The In-House Lawyer
“A really useful reference guide which covers all the key areas in running a company – definitely one to keep in the top drawer.”Nick Wilkinson, Managing Director, Takeda Telecom
“Running a Limited Company is easily the most clearly written book we have found on the legal and accounting aspects of business. It explains things simply yet thoroughly and, most importantly, shows us what we can handle ourselves and when we should seek professional advice.”
Ken Warner, Managing Director, Warner Associates (UK) Ltd
"I purchased this book in 2003, to help me launch my first proper full-time company. It gave me the skills required to manage a registered limited company and ensure that I stayed within UK laws. Without this book, launching a company with no money for accountants/lawyers would have been much much harder."7books.com
David has been a solicitor for 29 years, specialising in company and related law for private limited companies. David is also a qualified marketer, and his career includes profitable spells as Marketing Director of a market-leading legal services company, as well as twice setting up and running his own small business. He combines technical competence in company law with in-depth understanding of small and medium-sized businesses. Click here to read more.
Nick Montague is a Chartered Accountant, a marketeer and an experienced business adviser. He has worked with and assisted SMEs across a range of sectors and activities for 30 years. When not working in the business world he is a professional musician and conductor.
Forming a company and complying with the requirements of the Companies Acts is a burden. Companies must be registered, and are subject to continuing disclosure requirements. One of the most significant burdens on a company is the need for its directors to prepare annual accounts. The accounts are filed with the registrar of companies and are therefore available for inspection by the public, although the abbreviated accounts which may be filed by smaller companies only provide a limited amount of information. Sole traders and partners do not have to suffer these burdens. So why a company should be formed at all?
The answer lies in the benefits which arise from the separate legal personality of the company in certain circumstances. The two main benefits which can arise from the company’s legal personality are tax benefits and the benefits of limited liability. There are others, which will be looked at later.
The tax benefits can arise from the fact that the company is subject to its own special tax rules. If a business is carried on by a sole trader, he pays income tax on any profits, and capital gains tax on capital gains. The rule is exactly the same in a partnership in that the partners’ profits and gains are charged to income and capital gains tax in separate assessments. However, a company which carries on business pays only one tax, on both profits and gains. This tax is called ‘corporation tax’.
The rates of income and capital gains tax and the rates of corporation tax are different. Not only are the rates different, but the profits and gains which are subject to tax are also worked out differently. The taxes are also assessed and payable at different times.
The amount of profit which directors and shareholders wish to distribute from the company is also relevant when comparing the tax bill in the two different circumstances. Profits and gains which are taxed to corporation tax going into the company can also be taxed to income tax coming out of it, and into the pockets of its directors (as remuneration) and shareholders (as dividends), so the comparison between the two circumstances is more complicated than it first appears.
However, the general result of the differences between the two tax regimes is that the more profitable a business becomes, the more likely it is that corporation tax rules will produce a lower overall tax bill than the income and capital gains tax rules.
This is why a business often begins by being owned by a sole trader or partners but, when it grows larger, is transferred by them to a company formed for that purpose.
At what stage should a sole trader, or partners, form a company and sell their business to it in return for a shareholding in the new company?
Unfortunately, there is no overall magic figure at which a sole trader or partner automatically knows that a company should be formed – each case will depend upon many circumstances, and will require a complicated calculation.
Every sole trader or set of partners will need professional advice as to the appropriate time to ‘incorporate’ - form their own company and transfer their business to it. However, the bigger the profits, and the more sharply they are rising, the more likely it is that a company will be an appropriate vehicle through which to trade. Involving the professional adviser in the business on a regular basis is crucial to ensure that the company is formed at the right time.
1.9 Other advantages of forming a company
There are other advantages which flow from the company’s separate legal personality.
1.9.1 Separation of control and management
Sole traders and partners in a partnership are usually reluctant to entrust the management of the business to someone else, taking no (or a minimal) part in its day-to-day running, because they know that they will have to pay the debts of the business if it goes wrong. So, for example, ‘sleeping’ partners who take no active interest in the affairs of a partnership are rare. Even if the size of the business requires the appointment of managers, the partners will probably take an active interest on a day-to-day basis.
Shareholders, on the other hand, have the protection of limited liability. They are therefore more likely to allow their company’s business to be managed by someone else without feeling they need to intervene on a day-to-day basis. Company law therefore provides that the shareholders have power to appoint (and remove) special managers, who are called directors, to manage the business of the company. The directors are given stewardship, or custody, of the business of the company.
Since the directors are in a position of trust – looking after the company’s business for it – they are subject to all sorts of duties and liabilities. These duties and liabilities are onerous, so that the shareholders and their company are given protection against abuse of their position by the directors.
Of course, a shareholder may also be a director, and often the shareholders and directors are the same people. However, company law deals with directors and shareholders separately. The directors must still observe all of these duties and liabilities when acting as directors, even if they are also the shareholders.
1.9.2 New participants
A consequent advantage of this separation of control of the company (shareholders) and management of its business (directors) is that the introduction of a new shareholder into the company is usually easier than the introduction of a new partner into a partnership.
A new partner is jointly and severally liable for the debts of the business of the partnership, just as much as the most senior or longest-established partner. The new partner will therefore argue that he should have an equal, or substantial, say in how the business is run, and an adequate share in the profits, to recompense him for his risk. The existing partners may disagree. There is much scope for negotiation. A new shareholder in a company, on the other hand, knows that if the company’s business is run well, he may receive dividends and the value of his shares in the company should rise but, if the business runs into difficulties, he has limited liability. Consequently, all a new shareholder may be concerned about is whether the business carried on by a company is likely to be profitable, and whether the directors are competent. He will not necessarily be interested in participating in day-to-day management.
1.9.3 Raising capital
Of course, this means that it is often easier for a company to raise new money than it is for a partnership. A person will be far more cautious about putting his money into a partnership by becoming a partner (since he will have joint and several unlimited liability), than he will be about putting his money into a company by buying shares (since he will have the protection of limited liability).
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