10 Dos and Don’ts of Running a Limited Company

Starting and running a company can be a rewarding endeavour, but it also comes with responsibilities and legal obligations that every business owner must adhere to. Whether you are a seasoned entrepreneur or starting your journey as a company director, understanding the dos and don’ts of running a limited company is crucial to your success. This article will explore ten dos and don’ts to help you navigate the complexities of managing a limited company effectively.

1. Do Choose the Right Business Structure

Before you even start your limited company, choosing the right company structure is essential.

Unlike sole trader businesses, limited companies offer a separate legal entity, which can provide limited liability protection and tax planning advantages. However, it is crucial to assess your personal and business needs to determine if this is the structure that best fits you. You should also consult an expert lawyer and industry experts at this stage. 

2. Do Register Your Company

Once you decide to operate as a limited company, you must register your business with the relevant government authorities.

In the UK, you must register with Companies House. Failure to do so can result in fines and legal complications. Ensure all necessary documents, such as Articles of Association and Memorandum of Association, are in order during registration. 

3. Do Keep Accurate Financial Records

Accurate financial records are the backbone of a successful limited company. Keep detailed records of all financial transactions, including income, expenses, and taxes.

Additionally, invest in accounting software or hire a professional accountant to help maintain company tax returns and annual accounts records and ensure compliance with tax laws.

4. Do Pay Taxes on Time

Paying taxes, including corporation tax, on time is not only a legal obligation but also essential for the financial stability of your company.

Familiarise yourself with the tax deadlines for your business type and meet them. Failure to do so can result in penalties and interest charges. Ultimately, this can significantly impact your company’s finances.

5. Do Protect your Intellectual Property (IP)

If your limited company relies on unique products, services, or branding, protecting your intellectual property (IP) is crucial.

Register trademarks, patents, and copyrights as necessary to safeguard your company’s assets and prevent competitor infringement. Furthermore, ensure you regularly monitor competitor activity so you can act on any infringement as soon as possible and minimise the impact on your business.

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6. Don’t Neglect Legal Obligations

One of the most significant mistakes you can make as a limited company owner is neglecting your legal obligations. This covers a vast area of requirements, including data privacy, consumer law and corporate obligations. Although this may be onerous, failing to adhere to regulations and requirements can lead to fines, legal disputes, and even the dissolution of your company. As such, ensure you stay informed and proactive in fulfilling your legal duties.

7. Don’t Mix Personal and Business Expenses

It is crucial to maintain a clear separation between personal and business expenses. Mixing expenses can lead to financial chaos and make it challenging to track your company’s economic performance accurately. Many businesses will utilise business bank accounts to guard against this risk.

8. Don’t Underestimate Tax Planning

Tax planning is a critical aspect of running a limited company. Do not underestimate its importance, and do not assume you can handle it alone.

Consult a financial advisor to ensure you optimise your tax strategy and take advantage of available deductions.

9. Don’t Ignore Employment Law

Employment laws are in place to protect both employees and employers. Ignoring these laws can result in costly legal battles and damage your company’s reputation. Most business owners obtain tailored advice from an expert lawyer and make employment law compliance a priority.

10. Don’t Neglect Insurance

Insurance is an essential part of protecting your new business. Ensure you secure necessary insurance policies, such as liability insurance, to safeguard your company from unexpected events or legal actions.

Key Takeaways

In the hustle and bustle of daily operations, it is easy to lose sight of your business goals. Remember why you started your limited company in the first place and use your initial goals as guiding principles in your decision-making. Running a limited company can be a fulfilling and profitable venture. However, it comes with many responsibilities and challenges. By following the dos and don’ts outlined in this article, you can successfully navigate the complexities of running a limited company while minimising legal, financial, and operational risks.

If you need legal assistance running a limited company, our experienced business structure lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.