There are 1.9 million limited companies in England, and the main reason people choose to set up this way is to mitigate personal financial risk. If you are a sole trader, you are personally liable for any debts. As a limited company, the business is a separate legal entity; therefore, it is the business that is responsible, not you. If you currently have a limited company, or if you are considering setting one up, it pays to be organised and keep your accounts up to date. We’ve put together a list of five top tips to keep you and your business on the straight and narrow.
1- Open a Business Bank Account
Opening a business bank account is one of the first things you should do because your limited company is entirely separate from you as an individual. You need to do this as soon as you have registered your company with Companies House.
2- Keep Your Personal and Business Expenditure Separate
Life will be much easier if you keep everything separate, so try to avoid putting any personal transactions through your business account. As tempting as it may be to spend the money in the business account, it will also create serious tax problems. Use your own credit or debit card.
3- Don’t Use Your Personal Money to Fund Your Business
If you purchase something for your business with your personal money, you are entitled to claim it back. However, it makes things much simpler if you simply avoid doing this. Get a debit or credit card for your business account instead.
4- Don’t Use Your Company Credit Card for Personal Purchases
If your business has a credit card, DO NOT use it for personal purchases. The credit is for your business, not you. Always aim to pay off your credit card at the end of the month as well. This will ensure that you pay less for things, but it also means you will be more likely to get credit in the future.
5- What if it’s for Business and Private Use?
This can cause lots of confusion, but the best way to evaluate it is to see it as private expenditure but to claim a percentage for the business part. It’s down to you to decide how much the ‘business part’ is though. Break it down into how much you will use it for both personal and business reasons, and go from there.
If you are looking for an accountant now or in the future, get in touch to see how we can help you.