There are 3 main ways that you can take funds from your Limited Company – these are expenses, salary and dividends. Remember – you are a separate entity from your Company!
Expenses – You may have already incurred expenses personally when setting up your Limited Company such as: formation costs, insurance costs and other set up costs. Any expenses that you incur personally on behalf of the business can be reimbursed back to yourself. We always recommend that you reimburse expenses regularly to keep things simple.
Salary – Once your Company is up and running you will become an employee of your Limited Company, meaning that you are entitled to be paid a salary. The salary that we recommend each year changes in line with the new tax allowances that come into force. We recommend taking a monthly salary that becomes payable as soon as your Company begins to receive funds from its clients. Your Accountant will advise you on the most tax efficient salary to take and will handle the administration of registering your Company for PAYE and preparing the payroll for submission with HMRC.
Dividends – Dividends are paid from the Company profits/reserves. We recommend that you ensure your bookkeeping is accurate before you take dividends. Your dedicated Accountant at Gorilla will happily review your data to confirm amounts available as dividends, this is important when you begin operating as a Limited Company. You should remember that all of the funds in the Company account are not yours to simply take as dividends, some of these funds will eventually become due to HMRC as Corporation Tax (it is essential that you take advice on this).
Dividends can be taken from the Company as regularly or as infrequently as you like, provided the Company has made sufficient profit (or “reserves”), although we recommend taking dividends less frequently than your salary. It is up to the Company director (you) to decide when and how much is going to be paid.
More than One Shareholder..
Dividends should be paid to each shareholder in direct proportion to the amount of shares that they hold. So if there are two shareholders, one with 8 shares and the other with 2, then each time a dividend is taken each shareholder will receive dividends in this ratio e.g. a £1,000 dividend would be split £800:£200.
At Gorilla we deliver a technology driven accountancy service specifically tailored for Contractors and Freelancers who operate through a Limited Company. The accountancy and compliance requirements for Limited Companies are complex and ever changing. It is essential you have the right contractor accountants guiding you through and ensuring you are fully compliant.
Gorilla will make the running of your Limited Company as stress-free as possible for you, so you can concentrate on what you do best, making money. To find out more, give us a call on 0330 024 0406.