I am preparing accounts for a company mistakenly set up as limited by guarantee instead of limited by shares. The client is a doctor subcontracting to the NHS and has been paying himself in dividends since the date of incorporation in July 2010.
I have checked the articles of association (standard ones) and it states that a company limited by guarantee is allowed to distribute company profits to members and this can take any form.
My question is really, what form should they be distributed to minimise tax liability? There have been several queries like this on accountancy web and while none of the answers has been definitive the jist is that as long as the company isn't a not for profit organisation then dividends are ok. It does seem strange but I have not been able to find an example anywhere of how directors or members may receive payment from a company limited by guarantee.
I am in the process for closing the company and starting a new one limited by shares to avoid this problem going forward.
Any information would be very helpful
Replies (10)
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Articles
"I have checked the articles of association (standard ones) and it states that a company limited by guarantee is allowed to distribute company profits to members and this can take any form."
Where does it say that?
Not Dividends then
Director DOES NOT equal Member. Dividend DOES NOT equal remuneration .
Directors work, shareholders do not. Remuneration is earned income, dividends are investment income.
It is Directors' remuneration (in any form maybe, but still directors' remuneration) not a dividend distribution to a member.
Looks like it should all go on the P35 - grossed up of course - to me.
Hope the "incorporation error" was not yours.
.
Hope the "incorporation error" was not yours.
Posted by Mouse007 on Sun, 20/03/2011 - 21:00
This comment is entirely uncalled for and irrelevant to the question asked
Valid
Given the confusion between director and member and remuneration and distribution I think it's a valid point.
Yes
It seems the best solution.
I thought, from an earlier thread, that the client made the error upon incorporation?
Check the Articles again
Unless there's a specific prohibition in the articles companies Ltd by guarantee can distribute profits to members.
Paul is right
The first paragraph supports Paul's view. It includes a reference.
http://en.wikipedia.org/wiki/Private_company_limited_by_guarantee