A downside to running a limited company is that financial information is publicly available. However, micro-entities and small companies do not have to file a profit and loss account, so available information is somewhat restricted. This situation is set to change.
The information currently filed by a micro-entity at Companies House can be as little as just three figures: total fixed assets, current assets and current liabilities. If a company provides services, with profits largely withdrawn as remuneration, these figures might all be negligible.
For a company to be classed as either a micro-entity or small company, it needs to be below any two of three thresholds for turnover, balance sheet total (total of fixed and current assets) and average number of employees:
|Balance sheet total||£316,000||£5.1 million|
A company can continue to qualify under either definition if it temporarily fails to meet the criteria for just the one year.
The key change in the government’s white paper, Corporate Transparency and Register Reform, published in February – setting out its final position on reform ahead of introducing legislation – is that micro-entities and small companies will have to file their profit and loss account. This means that sensitive commercial information will be readily available to a company’s competitors. Employees, customers, family members and any other interested parties will also be able to see how profitable a company is. In addition, small companies:
- will lose the option of preparing abridged accounts, so a full balance sheet will be required; and
- will have to file a directors’ report.
Although it will be some time before the extended filing requirements come into effect, they are an additional consideration when setting up a new business or deciding whether to incorporate an existing business.