![]() It is responsible in its own right for everything it does and its finances are separate to the DIRECTORS OR SHAREHOLDERS personal finances.Īny profit it makes is owned by the company, NOT BY THE DIRECTORS (after corporation tax). The COMPANY is a legally recognised entity that you can set up to run your BUSINESS. It is important to separate these constituencies: ![]() ![]() So, it is vital to recognise that there are four parts or “constituencies”, to every limited company. Likewise, the company assets and company debts are not (generally) yours personally either. You as a person, when acting as a director are NOT the company! As a designated member you are not the limited liability partnership either. Limited liability is one of the main benefits of forming a company, as directors are not automatically personally liable for the debts of the company, as is the case for a sole trader or partnership.Īlthough it may sound like we are being pedantic, most small company directors need to stop merging the company and themselves together in their minds. Sole traders are, effectively, the business so it is their money and their debts. So, you are not able to take money out of the business in the same way that a sole trader can. This means the assets and profits belong to the company rather than the owners or shareholders. When a limited company is incorporated at Companies House, it becomes a legal entity in its own right. When you set up your limited company, you may think you can dip into your company’s monies, as and when you like, as it is your cash! Unfortunately, this approach is wrong and can often lead to financial problems for directors of troubled companies.
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December 2022
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