Lawson-West helping to ensure business owners know about dividends

As a business owner, do you pay yourself and others by way of a dividend? If so, do you know the rules? It was recently reported in the news that the fashion giant Next had paid some dividends in contravention of the rules in the Companies Act.  However, the consequences of their mistake are likely to be less serious than for a normal private limited company.

According to the Leicester Mercury, a ‘procedural oversite’ was made by Leicester firm Next in relation to the payment of their dividends. The error occurred on three occasions, however a spokesperson for Next stated that the errors are historical and will not have any effect on their financial landscape for 2016.

Owners of private limited companies are often paid partly by salary and partly by dividend as this is more tax efficient than a normal salary. However you need to be careful in doing this, making sure that there are sufficient profits to cover the proposed dividends and also that the relevant paperwork, such as board minutes, is in place and filed correctly. If the company gets into financial difficulties, then, as a director, you might find yourself personally liable to repay such dividends.

For more information please contact the Lawson-West Commercial team on 0116 212 1000.

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