What is a limited company? A UK director's guide

A limited company is a legal entity separate from the people who own and run it. It signs its own contracts, owns its own assets, owes its own debts and pays its own tax. That separation is the whole point: shareholders' liability is limited to the amount unpaid on their shares.

The consequence people underestimate is that company money is not your money. You take it out as salary, dividends, repayment of a loan you made, or a benefit, and each has a different tax treatment.

Shareholders own the company and receive dividends. Directors run it and owe statutory duties, including to promote the success of the company, exercise reasonable care and skill, and avoid conflicts. In most small companies the same person does both, which is why the distinction gets blurred.

People with significant control, broadly anyone holding more than 25% of shares or voting rights, must be recorded on the PSC register and at Companies House.

Annual accounts to Companies House within nine months of the accounting reference date. A company tax return, the CT600, to HMRC within twelve months of the period end. Corporation tax paid nine months and one day after the period end. A confirmation statement each year with a £34 fee.

Add VAT returns once turnover passes £90,000, RTI payroll submissions whenever anyone including a director is paid, and pension auto-enrolment duties once you have staff.

Accounts, directors' names, the registered office and shareholdings appear on the public register. Small companies file abridged or micro-entity accounts, which show a balance sheet but not turnover or profit, so commercial detail can stay private.

A director's residential address can be kept off the public record by using a service address, which is one reason directors use a registered office service.