Once you receive a Certificate of Incorporation from Companies House you have formed your limited company and the limited company directors are now free to issue shares, open bank accounts and start trading, etc.
But be aware, there are still limited company legal requirements you need to fulfil and the limited company directors need to make some company resolutions.
To discuss and agree on the fulfillment of your legal requirements you will need to hold a meeting of all the limited company directors (called a ‘board meeting’). All board meeting decisions must be recorded in writing (called ‘board minutes’). Or, alternatively, all the limited company directors can sign a written company resolution.
Limited company resolution #1 – Issue shares
The limited company directors should allot and issue one share of £1 each to each of the subscribers to the Memorandum of Association. If you have more than one director, a majority of the limited company directors must agree to do so at the board meeting.
Limited company resolution #2 – Issue share certificates
To provide the shareholders with a title document to their shares, the limited company directors will need to issue share certificates at the first board meeting.
Find out more about issuing shares and share certificates.
Limited company resolution #3 – Open a bank account
To open a company bank account, the limited company directors must pass a company resolution of approval.
Limited company resolution #4 – Appoint auditors
The limited company is obliged by law to file annual audited accounts (i.e. approved by a registered auditor). The directors must pass a company resolution appointing auditors for the limited company; the auditors must be independent, i.e. not employees of the limited company.
But there are limited companies that are exempt from having an audit. Find out if you need to appoint auditors here.
If you don’t need an audit, you must appoint accountants to prepare the limited company’s accounts.
Limited company resolution #5 – Appoint a company secretary
Appointing a company secretary is optional after 6 April 2008. If you don’t appoint a limited company secretary, make sure that one of the limited company directors is tasked with ensuring that all company secretary duties are carried out.
Limited company resolution #6 – Decide which financial year end to use
In limited company terms, the financial year end is known as the ‘accounting reference date’. The accounting reference date automatically falls on the last day of the month in which the anniversary of the limited company’s incorporation falls. But it can be changed.
Find out more about how you can change your limited company’s financial year end.
Limited company resolution #7 – Decide where your limited company’s registered office will be based
Your registered office is often your limited company’s office. But you can, as an alternative, use the address of your solicitor or accountant. They will, though, make a charge for this.
Limited company resolution #8 – Decide on the frequency of future board meetings
In practice the day-to-day running of the limited company will be delegated by the board of directors to one or more of them so that it’s unnecessary to hold board meetings frequently.
If the limited company directors don’t wish to hold a board meeting, they can pass a written company resolution as long as all the directors sign that company resolution. The company resolution is dated when the last director signs it and it’s entered in the company minutes book.
Limited company resolution #9 – Decide whether to hold Annual General Meetings
AGMs are traditionally used as an opportunity to lay the limited company annual accounts and directors’ and auditor’s reports before the shareholders, and to deal with other matters (such as the re-election of any directors retiring by rotation and the annual appointment of auditors).
From 1 October 2007 there is now no longer any legal need to hold an AGM, unless your Articles of Association require you to do so. But there is nothing stopping you electing to hold AGMs, if you want to.
Limited company resolution #10 – Transfer assets to the limited company
If you’ve been operating a business prior to forming your limited company, you can transfer the assets and debts of the business to the new limited company at an agreed sum and receive shares and possibly a credit to a director’s loan account in exchange.
But you cannot burden your limited company with more debt than assets. You cannot sell your personal property to the limited company at inflated prices or exchange limited company shares for personal property that is overvalued.
If a limited company director wishes to buy a non-cash asset from the limited company or dispose of such an asset to the limited company (and that asset is above a certain statutory value) the shareholders must approve the transaction in a General Meeting, or by written company resolution. Your accountant can advise you on this. You will also need to take legal advice on how to effect the transfer of your assets to the company.
The limited company directors will also need to pass an appropriate company resolution which must be documented in the board minutes. Stamp duty may be payable on documents relating to the transfer of assets (e.g. property).
Limited company resolution #11 – Decide whether you want to introduce goodwill into the limited company
This shouldn’t be entered into lightly nor without the help of an accountant, but, with careful planning, if you incorporate an existing business (i.e. turn it into a limited company), you should be able to create a sum for goodwill.
Simply put, if you introduce a sum for goodwill from your present business as you incorporate to a limited company, as the business proprietor you will have created a sum in the company’s balance sheet – a sum that is due back to you.
Lawpack’s book 101 Ways to Pay Less Tax gives further tax guidance on how to introduce goodwill into a limited company, plus many other tax-saving tips for your business.
Limited company resolution #12 – Pay tax
You’ll need to report your new limited company to your local tax office and if you’re employing staff, including paid directors, who are employees of the limited company, you’ll need to ask them to set up a PAYE scheme.
The tax office will provide you with the documents required to operate a PAYE (pay as you earn) scheme and tell you how to make National Insurance contributions. You should also contact HM Revenue and Customs to find out whether you need to register for VAT.
Your accountant will be able to help you with queries concerning corporation tax and capital gains tax. Lawpack’s book Tax Answers at a Glance also includes tax guidance on corporation tax, capital gains tax and registering for VAT.