Obligations in Running Your Company
When you begin running your own business you’ll soon find that you have far more obligations than you ever did before. If you’re used to having all your tax affairs taken care of automatically for you by the PAYE system, it can be quite a shock to suddenly be responsible for so many things on your own.
The simplest form of company is the Sole Trader and, with that structure, the burden of regulation is at a minimum. Essentially your own assets and the company’s assets are the same. You have unlimited liability, meaning that you are personally responsible for any debts the company incurs. Your chief obligations lie in the self-assessment tax return which you must submit each year to the government and in paying your National Insurance Contributions appropriately. You must register as self-employed for national insurance purposes within three months of starting your company or you will be liable to an automatic fine.
If your business is structured as a Limited Liability Company (LLC), you will have both greater legal protections and more onerous obligations. Your are required to file accounts each year with Companies House. You also need to file a corporation tax return. If your turnover is more than about £81,000 per year, you will need to register for VAT and take account of it in all of your transactions. Failure to fulfil these document filing obligations in a timely fashion will lead at a minimum to automatic fines and, potentially, in the more serious cases, to criminal prosecution and disqualification from holding a company directorship.
There are strict regulations that surround the selection and display of company names. For example, names with the word “Royal” in them are banned unless you have received prior permission from the relevant authority. You cannot pick a name which is too similar to another company’s name or to a registered trademark. In addition, you must quote your company’s name and registered address on all company stationery. The company name must be displayed prominently outside any premises where its business is carried on. If your business operates from home, that means you are required to display the company name outside your home.
Companies House must be kept informed of any change in your company’s address, or any changes in its key personnel, such as the resignations or new appointments of directors or company secretaries.
If the company becomes financially distressed, your own personal assets are protected provided that you have acted in good faith throughout. Directors who have been recklessly irresponsible in running up debts which they had no good reason to believe the company would be in a position to repay can be held liable for fraud and fined or imprisoned. If your company is in the process of being wound up, you are required to state this on all company documents, such as any invoices that are issued.
Certain legislation which applies to all companies may seem anomalous in the home environment. Nonetheless, it does apply to all businesses, even home-based ones, so you do need to be aware of it. Examples include the recent ban on smoking in public places, and health and safety regulations.
This article is intended to provide only a broad overview of your obligations in running a company. Many of the specifics, such as VAT requirements or the rules regarding health and safety in the workplace, are dealt with in greater detail in articles elsewhere on the site.