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vertice services presents what is a
private limited company buy shares a
private company limited by shares is a
legal structure or better it is an
organization that you can set up to run
your business a limited company has its
own rights and duties for everything it
does and its finances are separate from
your personal finances this means that
the shareholders responsibilities for
the company are limited to the value of
shares that they own but haven't paid
for if the company goes bankrupt the
directors and shareholders aren't
responsible for the debts of the company
as long as they haven't broken the law
in order to register a private limited
company buy shares you must have at
least one director and one shareholder
the director is an office holder and is
the individual responsible to try and
make the company a success using their
skills experience and judgment the
director can also be an employee working
daily in the business which means he can
have a salary alternatively the director
could have no salary and work as a
non-executive director the shareholders
are the owners of the business holding
company shares and they can cash the
business profit money out as dividends
as long as the company has accumulated
profits I'll explain about the
distribution later on a private company
limited by ship is must have its capital
its capital could be seen as the total
money invested in the company by the
shareholders and the company capital is
always divided into company shares let
me give you an example a hairdresser
called Ameen wants to open a hairdresser
salad and called all you need is love
Limited let's say for instance that the
hairdresser wants to invest ten thousand
pounds in her business she can divide
ten thousand pounds of investment in ten
thousand shares of one pound H if she
doesn't have any partners she will hold
all the ten thousand shares so let me
summarize the ways you could cash the
money out of a limited company
what if you're a director you could cash
the money out as salary too if you're a
shareholder you could cash the money out
as dividends 3 you can also lend money
to the company as a loan and the company
needs to pay you back as a loan
repayment for you can invest money in
the company as capital but you can only
cash the money out eventually when you
sell your company shares partially or
totally once you've sold the business to
somebody else a limited company must be
registered in Companies House after 12
months of registration you must submit
your company accounts to Companies House
and HMRC a very simple version of your
company profit and loss should be like
this total sales - total costs and
expenses equals total profit a private
limited company buy shares needs to pay
corporation tax of 19% of total profit
the corporation tax must be paid nine
months after one year I'm not sure if
you understood but the corporation tax
must be paid 21 months after the company
was incorporated now the shareholders of
the company must make a decision if the
total profit after tax will be kept as
retained profit in the company for any
possible eventuality or reinvest back
into the company or they can cash the
money out as dividends let me give you
an example let's say for instance that
in her first year trading all you need
is love limited had total sales of
70,000 pounds and total business costs
and expenses of 30,000 pounds the total
profit for the year is 40,000 pounds all
you need is love Limited will need to
pay seven thousand six hundred pounds in
corporation tax the total profit after
tax is thirty two thousand four hundred
now a Meanor the shareholder of the
business must make a decision if she
wants to cash the money out as dividends
or keep the money as retained profit
let's say Amina wants to cash twenty
thousand pounds to pay her personal
bills and wants to keep 12 thousand four
hundred pounds as retained profit let me
show you the concept of not having mixed
personal and company finance
responsibilities and duties let's see
the profit and loss again from total
Saif is down to retained profit the
money has always been in the company's
possession and responsibilities now as
soon as the total profit after tax is
distributed to the shareholder as
dividends the money is in the possession
of the shareholder and this income as
dividends will be taxed before I go into
more detail about dividends taxation let
me explain a little more about dividends
there are two kinds of dividends interim
and final interim dividends means that
you can cash the money out on a monthly
basis final dividends means that you can
cash the money out at the end of the
financial year the shareholder could
catch the money out as interim dividends
plus final dividends it is not either
one or the other
coming back from dividends taxation
Amina must declare her dividends in her
self-assessment tax return every year
and pay tax accordingly in the financial
year 1718 dividends will be taxed as
follows the first five thousand pounds
is tax-free
from zero to thirty three and a half
thousand pounds you pay 7.5% from thirty
three and a half thousand to one hundred
and fifty thousand pounds you pay thirty
two point five percent more than one
hundred and fifty thousand pounds
you pay thirty eight point one percent
Amina's dividends tax liability will be
total dividends cash out of twenty
thousand pounds minus five thousand
pounds which is tax-free equals fifteen
thousand pounds seven point five percent
of fifteen thousand equals one thousand
one hundred and twenty five pounds and
that's how much she will pay now let me
give you a few vertice services tips one
always keep control of your business
income and expenses to please do not
submit your accounts delay the company
will be fined and it could lastly be
struck off from company's house three
the company accounts is not the only
document to be submitted to the tax
authorities you also need to submit the
confirmation statement to companies
house and corporation tax return to HMRC
for make sure you register your company
as an employer PA ye to deduct the taxes
from your employees fine your company
must register for v80 if the turnover
reaches eighty-five thousand pounds six
find an online bookkeeping solution like
the one we provide to our clients
vertice plus it's amazing traditional
accountancy as probably you know is
already old fashioned seven find a very
good accountants make sure you choose
one accountant who has the same goals
and values as you have if you want to
grow your business choose an accountant
who already grows his business in this
way he's the right person to give you
advice in how to grow your business 8
don't try to be too smart as a director
as I explained to you you could be
disqualified as a director and also
criminally prosecuted
nine always plan ahead ten enjoy your
business journey
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