12.06 – Legal Processes in Business Finance
Whether the money in the business is yours alone, provided by family and friends, or supplied by outside financial institutions, you have a legal responsibility to ensure your accounts are always in good order. If your business is successful and you need more money to expand, you’ll need accurate financial information to support your case. Conversely, if your business faces financial difficulties, having precise accounting information becomes even more crucial to strengthen your position.
Additionally, tax and VAT authorities require that your figures are correct and timely, irrespective of the circumstances.
Carrying Out An Audit
Companies with balance sheet totals exceeding £3.26 million or annual turnovers above £6.5 million (if formed before January 1, 2016) are required to appoint an auditor and have their accounts audited. For businesses formed after that date, the thresholds are £10.2 million and £5.1 million, respectively. While most small, privately-owned limited companies qualify for audit exemption, certain conditions might still necessitate an audit:
- The articles of association require an audit.
- Shareholders owning at least 10 percent of the company’s issued share capital request an audit.
- Shareholders owning 10 percent of any class of company shares request an audit.
To check whether your business is exempt from an audit, visit gov.uk/audit-exemptions-for-private-limited-companies.
The auditor’s job is to report to the shareholders on whether the accounts have been properly prepared according to the appropriate accounting rules and if they give a true and fair view of the company’s financial state.
Filing Your Accounts
If you’re trading as a company, you must file your accounts with Companies House each year. For more information, visit gov.uk/file-your-company-annual-accounts.
Keeping your business finances in order is not just a matter of good practice but a legal obligation. Proper accounting ensures that you can present your financial health accurately to investors, authorities, and other stakeholders, safeguarding your business’s future.
