For plan B business bank account is it possible to inject personal account money into

[sbakoola]

No at the moment I don't have an accountant, I've wound up my IT contractor limited which is why I am asking on here. You refer to a directors loan above, I thought that was a a loan from a company account to the director's personal account which is not what I am asking about.

I am actually asking about how to go about making a lump sum cash investment into a new limited company say a year down the line from when it was first started to say but office equipment, the money would come from my personal account.

Also what if there is a shortfall of money to say pay VAT in the company bank account, how would you go about getting money into the company bank account from your personal account to pay off the VAT ? is this even legal ? how would I go about it and
what would it be declared as ?

[northernladuk]

No at the moment I don't have an accountant, I've wound up my IT contractor limited which is why I am asking on here. You refer to a directors loan above, I thought that was a a loan from a company account to the director's personal account which is not what I am asking about.

I am actually asking about how to go about making a lump sum cash investment into a new limited company say a year down the line from when it was first started to say but office equipment, the money would come from my personal account.

Also what if there is a shortfall of money to say pay VAT in the company bank account, how would you go about getting money into the company bank account from your personal account to pay off the VAT ? is this even legal ? how would I go about it and
what would it be declared as ?

Time to call that accountant back. You really don't want to be messing around with VAT like that. Spending the VAT mans money is very bad. Sounds like your best investment right now is an accountant.

[eek]

Time to call that accountant back. You really don't want to be messing around with VAT like that. Spending the VAT mans money is very bad. Sounds like your best investment right now is an accountant.

The solution is to either release more shares from the company and to buy them or to loan the company the money.

A more worrying issue is that you've spent the vat money. You really don't want to have done that and need to correct that asap then change things so that you don't end up in that situation again.

[sbakoola]

This is hypothetical question I haven't even started a new company yet for plan B. Putting money from my personal account into a business account to make an investment is not something I've ever done before but it would be a very likely scenario that I'm interested in.

Supposing at inception I start my company with a £100,000 investment only to find 6 months down the line I need a further £50,000 for investment, what's the procedure and the name for when I would want to invest a further £50,000 of my personal money into the business ? how would that £50,000 be classified in terms of tax on the company ?

I suppose eek answered my question i.e. either loan the company some money or release some shares and buy them. I'll have to look at these two methods.

[Wanderer]

You refer to a directors loan above, I thought that was a a loan from a company account to the director's personal account which is not what I am asking about. I am actually asking about how to go about making a lump sum cash investment into a new limited company

Yes, you do account for it as a director's loan. This type of loan can go either way, ie from the company to the director OR from the director to the company.

When the company has profits, it can pay this loan back to to the director. The director doesn't pay tax on the loan repayment because it's a loan, not income.

[VectraMan]

When the company has profits, it can pay this loan back to to the director. The director doesn't pay tax on the loan repayment because it's a loan, not income.

And equally, the company doesn't pay tax on the money as it's a loan. The balance sheet will just come out negative, with the director as a creditor.

But if you're buying equipment, you could just pay for it personally and reclaim the expense from the company at a later date. It all amounts to the same thing.

[Wanderer]

But if you're buying equipment, you could just pay for it personally and reclaim the expense from the company at a later date. It all amounts to the same thing.

And if the company goes bust then you still own the equipment personally and not the company....

[sbakoola]

Interesting... I suppose the initial amount that you put into the business bank account at incorporation is important (as this is not considered as a loan right ?) and this initial amount is related to the shares that you initially draw up ? (am I right or wrong ?).

Normally for I.T. contractor limited its a £1.00 initial amount and just one share at £1.00.

[IR35FanClub]

[accounts=sbakoola;1702876]Interesting... I suppose the initial amount that you put into the business bank account at incorporation is important (as this is not considered as a loan right ?) and this initial amount is related to the shares that you initially draw up ? (am I right or wrong ?).

Normally for I.T. contractor limited its a £1.00 initial amount and just one share at £1.00.[/QUOTE]

Really.. you need an accountant before you start winding people up and get called a sockie. its just been explained that what you put into the company IS a loan, from you to the company, which can be paid back later. You can make the company pay with the loan with interest if you want but you'll need to declare that on your personal tax return as income. an accountant will tell you if that is sensible given your business idea.

And £1/1 share is not normal. there's no normal. my company had 1000 shares of which 100 are issued. it was because i went to see an accountant and said although i do contacting now, i may want to do something else later and sell shares to investors to raise capital.

you dont need to have a company to have an accountant. I'm setting my gf up a business and took her to see an accountant to discuss the best way to set it all up. advice was not to go ltd until she his circa 40k earnings and be sole trader till then.

[IR35FanClub]

To try and make it easier to understand.. think of a directors loan account as a bank account, it can be in credit or overdrawn. With the directors loan account if it is in credit it means you have put some money in the company or spent money on behaf of the company and therefore the company owes you money. If the dirctors loan account is overdrawn, it means you have taken some money from the company which you need to pay back. (this seems to be what you are familar with).
When you start this fictional company, you can capitalise it with shares, but then to take money out you need to pay dividends which have to be taxed. If you personally lend the company money instead, you can repay the loan tax free, as it is your money.