Running a limited company provides financial benefits as well as financial responsibilities. With all the obstacles in handling red tape and bookkeeping, a contractor can obtain financial freedom.
A company can function similarly to what individuals do. It can borrow and spend money, contract for services, apply for loans, pay tax, and other legal responsibilities. The owner has a limited personal responsibility with the company. However, he is legally mandated to manage the company within legal terms.
Contractors contracting with the company
Companies have to main functions. The first is to contract with clients or third parties. The second is to manage income flexibly.
Clients need to have the capacity to pay limited companies. Thus, a limited company owner must set up a bank account it the name of the company. Owners cannot receive contracting income in their name.
Limited company owners can try searching for the bank that provides the best corporate accounts. Banks are apprehensive in providing credit with companies that have just recently started. It is recommended that contractors must not apply for it, yet. A new company can begin with a simple checking account. After building a proof of regular income, a limited company can experiment with the other products of these banks.
It is required that limited company contractors must provide clients with signed timesheets from the said client in order to be paid with one’s own invoices. Invoices can be created with the company’s name. Limited companies can provide information regarding the payment on the invoice.
A limited company must keep receipts for contracting expenses if the company desires to have money deducted from their taxes. Receipts that are original are required, as well as a clear indication of how much VAT is included in the expenditure. Limited companies must ask for one that has VAT reflected in the receipt when purchasing things.
Contractors can obtain cash from their company account to cover the expenses they have paid personally. It is recommended that a debit card from the bank can be used to pay for business expenses.
Limited companies are required to submit a copy of the company accounts at the end of every fiscal year. This is paired with a finished corporation tax return. Moreover, Companies House also needs the submission of accounts one per year. Accounts must be maintained kept track of.
If you are in need of the services of an accountant in managing your books, you can contact our firm for expert services.