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Case Study: Correctly setting up a Limited company

Jo from Lightbulb Moment Limited recently came to us as she was overdue filing her accounts with Companies House. Here we find out from Jo a brief outline of what happened with setting up her company. We thank her for agreeing to share the story.

Starting a company

Jo is a professional with nearly twenty years experience working in the corporate sector. She decided to balance life and work and started working for herself, planning initially to be self employed. To gain work from larger corporate companies and longer term contracts, she needed to register as a Limited Company. Doing so means for those companies there's no issue with the HMRC considering Jo an employee (and the costs and legal complications that go with it) and it also protects them if there is any kind of negligence. Jo went to the Companies House website and felt that she had followed all the information correctly to setup her company. Over the next 20 months she took drawings from the business each month for wages. "I thought I was being smart as I was not taking a great amount as I wanted to reduce the amount of Tax I would pay" she comments.

Late accounts

"There were some complications with changing of address that I didn't realise hadn't been accepted by Companies House - first lesson there was to find the forms to fill in!" says Jo, raising an important point. "When my post caught up with me I saw letters with warnings and fines! I spoke to Companies House on the phone and was going round in circles; regulations quoted at me and different departments to speak to. I was lost and was losing many hours that I should have been focusing on my work." Jo was having a similar experience to many clients that speak to us, where they are intelligent professionals in their field, but not necessarily in the mechanics and detail of their company finances. Jo continues to say "I decided that it was time to visit an accountant and Peter Jarman & Company was recommended to me. I was only 20 minutes into a meeting with Peter and realised I had made mistakes right from the start. I felt awful, as I'd done a great deal of reading to try and set this up correctly and, to be honest, at minimal cost.

What was discovered

Some of Jo's discoveries included that she had "I registered my company to have no shares! I thought this would be less hassle as I would not need to manage them, it actually made it so I could not draw dividends from the company. Therefore it turned out that where I was taking drawings out of the business I was paying more tax on that then If I had a payroll scheme or using dividends. In all of my research I hadn't seen anything about this, I was shocked at making such a huge error! However my mind was put at ease by the end of a great first meeting with Peter. His team immediately set to work on fixing my mistakes, with no blame attached so that I didn't feel bad or stupid. They managed to get everything put back in place and with their detailed knowledge found a way to save me a great amount of tax and reduce my fines! Whilst I was paying a little more for this service than I had planned to do by doing it myself, the fines and the potential tax I might have paid if I had continued alone eclipsed the fee, which I now realise is a small but very important investment in ensuring I keep as much of my hard earned money as possible and eradicating the huge amount of stress I had gone through until that point."

Lesson learned

Jo works in Learning and Development, she had her own lesson she highlighted: "I thought I knew what I was doing but this stressful, and nearly very expensive, experience really showed me how much knowledge PJCO have and they have organised things I did not realise needed doing or had even thought of. I'm very grateful for their friendly support. Now I can focus on what I do best and need not worry about the tax side as PJCO are doing what they do best for me." Jo is Director of Lightbulb Moment Limited, a company that provides design and delivering of training online. Jo also delivers webinars, Train the Trainer qualifications for online training and much more. You can follow her on Twitter @LightbulbJo and see her blog at www.lightbulbmoment.info



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