By law, if your business is a limited company or a partnership whose members are limited companies, you must produce a profit and loss account for each financial year.
Self-employed sole traders and most partnerships don't need to create a formal profit and loss account - but they do need to keep adequate records to complete their Self Assessment tax return fully and accurately.
However, there are key benefits to producing formal accounts. If you are looking to grow your business, or need a loan or mortgage, for example, most institutions will ask to see three years' accounts.
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