When you become a company director or register a limited company there is a lot to consider and do.
To help with the accounting side of starting a limited company, I have created a simple checklist. If you have any questions about any of the steps below, please feel free to contact me firstname.lastname@example.org
Limited Company Accounting Checklist
1. Register as a company director
My first suggestion is that you register with your tax authority as a director.
You will need to do this for a couple of reasons. First, it is usually a legal requirement. Second, registering as a director will enable you file your income tax return each tax year. As you are entitled to dividend payments from your limited company, these will need to be declared, hence the need to file an income tax return each year.
Depending on your tax authority, upon registration, you will receive helpful reminders and be able to gain advice from their helplines.
Depending on your country of residence, you may also need to register the company with your tax authority in order to file the company's annual corporation tax return.
Note: If you are based in the UK, you will need to register with HMRC. You can register online at www.hmrc.gov.uk. Your annual income tax return is referred to as self-assessment tax return. If you need any help with this, please get in contact (I obviously charge for my services). The company would have been registered with HMRC automatically upon incorporation.
2. Open and activate online tax accounts
Once you have registered as a director with your tax authority, you may receive a tax reference or identification number (depending on your country of residence).
Most tax authorities allow you to file your annual income tax return online, so open an online account.
Do the same for your limited company tax account (if applicable). You should then have an online individual tax account for your personal tax return and an online company tax account for your company's tax return.
Note: If you are based in the UK, you should receive a Unique Tax Reference (UTR) for yourself and a separate UTR for the company. Once you have these, you can open an online tax accounts at www.hmrc.gov.uk.
3. Open a company bank account
You will need to keep company and personal financial transactions separate.
One of the best ways to do this is to open a company bank account. Most retail banks offer company bank accounts. Book an appointment and get your new business bank account opened.
Note: If you are in the UK, you will need your incorporation certificate from companies house to open a company bank account.
4. Find an accountant
An accountant will help calculate your tax liability, detail profitability of the limited company and file your self-assessment tax return and companies corporation tax return. Having an accountant is also great for advice and support. I suggest you find an accountant as early as possible - many accounting mistakes can avoided by having an accountant early.
5. Keep all receipts and purchase invoices
In order to calculate the true profitability and growth of a limited company, all details of income and expenditure need to be kept.
It is also usually a legal requirement to keep these documents. Depending on the size of the company, a simple folder containing the documents can suffice.
If you have any questions or concerns, contact your accountant!
6. Create a bookkeeping system or outsource to a bookkeeper
Even though your accountant will calculate the tax and profitability of the company, you will need to keep record of the day-to-day financial transactions of the company. Keeping record of these day-to-day transactions is referred to as keeping the "books" or accounts (the accountant will use the books or accounts in order to calculate profit and provide tax services).
Note: Most company directors prefer to outsource the bookkeeping so that they can focus on growing and managing the company and ensure that the accounts are kept correctly. You can outsource your bookkeeping to me (the Bookkeeping Master). Simply send me an email email@example.com or visit my bookkeeping services page.
If you are operating as a sole trader, I suggest you read my Self-Employed Accounting Checklist post.