Contractor Limited Company Mum and Dad

In a Nutshell

Completely Separate

In a sentence

A limited company is a legal entity in its own right, and the directors are its legal guardians.

When a contractor sets up a limited company, they are creating a new entity that has its own rights, privileges and legal framework. Think of a limited company as an individual, it may have certain ties and bonds to others but is nonetheless independent of every & any other individual.

You cannot treat your contractor limited company as simply an extension of yourself. You may be a director &/or shareholder but you are still obliged to follow certain rule & regulations in your dealings with it.

Hey?

It can be confusing if you are new to contracting and have just set-up, or in the process of setting-up, your own private limited company. Think of your limited company as being your child.

As a parent you have various legal and moral duties to protect your child and do your best to bring them up. Same applies to running your own limited company - you have definitive legal obligations to nurture & grow your limited company.

Do Your Duty

If you remember just one thing, remember the absolute imperative to keep your business and personal money separate. Same goes for tax, income & outgoings - the line between you and your contractor limited company is jet-black and solid...and about six foot wide!

Your contractor limited company is an individual legal entity that will have its own; contracts, assets, income and tax bills. Transferring money between your contractor limited company bank account and your personal bank account is more complex than a single transfer of funds and has tax consequences.

Mum & Dad

Your contractor limited company has parents, shareholders who reap the rewards and directors who educate & discipline. Quite often, the mum/dad shareholder/director will be the same person, especially for contractor limited companies.

As a director you are also an employee of your contractor limited company, you are not self-employed. Even owning 100% of the shares does not change this basic relationship.