For freelancers who incorporate, the term 'director-shareholder' defines their dual role. It combines company ownership with legal management duties.
What is Director-shareholder?
A director-shareholder is an individual who both owns shares in a limited company and serves as its director. As a shareholder, you own part of the company. As a director, you are legally responsible for managing its day-to-day operations and ensuring compliance.
Why is this important?
This structure is crucial for freelancers who form a limited company. It clarifies your legal roles and responsibilities. Understanding this helps you manage your business correctly, comply with regulations, and separate your personal and business finances.
How does it work?
You register a private limited company, typically as the sole person. You are then appointed as the director and issued shares, making you the owner. You run the business, and profits can be taken as salary, dividends, or retained in the company.
Pros and cons
Key advantages include limited liability, potential tax efficiency, and a professional image. The main drawbacks are increased administrative duties, compliance costs, and personal liability for wrongful or fraudulent trading as a director.
Conclusion
The director-shareholder model is a foundational structure for incorporated freelancers. It offers benefits but comes with serious legal duties. Always seek professional advice to ensure it's the right setup for your specific situation.
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