If you have just started up a limited company, the director’s loan account can be one of the trickiest concepts to get your head around.

What is a director’s loan

The director’s account is a virtual account that exists only in your accounting records as a way to keep tally of the flow of money between you as an individual and the limited company.

Unlike a sole trader, when you set up a limited company, the company is separate from you as an individual (otherwise known as separate legal entity). Money earned by the business belongs to the company and not to you personally. However, there are various ways that you can take this money out and the director’s loan account keeps track the interactions between you and the company.

 

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