So in summary, the things you need to do to set up a limited company are: 1. Work out share values 2. Draw up articles of association 3. Draw up memorandum of association 4. Appoint members of company and directors and secretary 5. Submit your documents to the Companies house for registration as a limited company 6. Decide your financial year 7. Display your certificate of incorporation from registration at your companies registered address.
Ensure you have and comply with all the statutory registers and record books 9. Ensure your company complies with the companies act requirements. People who can hold shares in the company depend on what type of limited company it is. A private limited company can only sell shares to family members and friends but cannot sell shares to the general public, where as public limited companies shares are traded on the stock exchange and thus can be brought by the public.
A sole trader has unlimited liability in the business this means there is no distinction between the assets of the business and the owners personal assets such as home, car or other belongings, what this means is if the business goes bankrupt the owner may have to sell of some of their personal belongings in order to pay off the debts of the business. A sole trader differs from a limited company in the respect that directors only have limited liability, which means they are only responsible for the debts up to the value of their shareholdings.
Limited companies have a warning to people dealing with them that their debts might be left outstanding if the company goes bankrupt, the warning is the name of the company LTD for a private limited company and PLC for a public limited company. In response to your question about differences in sole trader and limited company accounts, I can tell you there are a number of differences which I will now outline for you. A sole trader must prepare accounts every year purely for submission with its income tax return and for personal use in the business.
The accounts are much simpler and less costly to create than limited company accounts which have to be audited. Also limited companies must file a summary of their audited accounts with the companies registration office. Limited companies also have to pay corporation tax which must be recorded in the final accounts, sole traders do not pay this tax they pay through income tax instead. The corporation tax is charged on a limited companies profits at 25 per cent of the first 50,000 and 32 per cent of everything above that.
Income tax is charged to sole traders at varying rates, up to 46% on the profits earned by the business in any year, regardless of money taken out of the business for that year. The first 3,150 earned is tax-free, the next 10,000 is at a rate of 24 percent and everything above this is at 46 percent. Another difference is that a limited company can have any year end it chooses for its final accounts where as a sole trader must submit its income before January 31st each year and is liable also to a 10 percent surcharge for late submission.