Can One Person Own and Run a Limited Company?

Who this guide is for

This guide is for sole traders, contractors, consultants and small business owners considering a one-person limited company.

It is also useful if you already have a limited company and are the only director and shareholder.

How a one-person limited company works

A limited company can be registered with one director and one shareholder.

The director runs the company. The shareholder owns the company. In a one-person company, the same individual usually holds both roles.

The company has its own company number, registered office, bank account, tax records and filing responsibilities.

The company is separate from you

Even if you are the only person involved, the company is legally separate from you.

This means company income belongs to the company, not automatically to you personally. Money should be taken out properly as salary, dividends, expenses, loan repayments or director loans depending on the facts.

Using the company bank account like a personal account can create tax and record-quality problems.

What responsibilities apply?

A one-person company still normally needs to:

• keep accounting records
• file annual accounts
• file a Company Tax Return
• pay Corporation Tax where due
• file a confirmation statement
• keep Companies House information up to date
• operate payroll if paying salary
• manage VAT if registered or required to register

The fact that there is only one director does not remove these duties.

Salary and dividends

If you are the director and shareholder, you may take money from the company through salary, dividends or both.

Salary may need payroll reporting through PAYE. Dividends can only be paid from available profits and should be documented properly.

Director loan accounts also need attention if money is taken out without being salary, dividend or reimbursement.

Pros and cons

A one-person limited company can offer:

• limited liability in many normal circumstances
• a more formal business structure
• potential tax planning flexibility
• professional image
• separation between business and personal finances

It also brings more admin than being a sole trader, including accounts, Corporation Tax and Companies House filings.

Common mistakes

A common mistake is assuming a one-person company is the same as being self-employed.

Another mistake is taking money from the company without deciding whether it is salary, dividend or loan.

Some directors also forget that they remain responsible for filings even if an accountant helps.

What to do next

If you want to run a one-person company:

1. Decide whether a company is better than sole trader status.
2. Register the company correctly.
3. Open a company bank account.
4. Set up your own financial record system.
5. Plan salary, dividends and tax.
6. Track Companies House and HMRC deadlines.