Choosing the legal structure for your new business is a crucial decision.
The structure chosen can affect the amount of tax paid, the volume of paperwork necessary, personal liability, and the ability to raise capital.
Remember that what works for one company venture may not work for another. In the early phases of your business, it is important to select a structure that best meets your requirements.
In this article, corporate structure advice, we consider the process and mechanisms involved in more detail.
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What are the different types of business structure?
- Sole Trader
This is the most straightforward business structure to register. If you begin working for yourself, you are a sole proprietor and must register your business with HMRC. As a Sole Trader, you run the firm by yourself.
You are therefore permitted to keep all of the earnings as income, but you must pay tax and national insurance by filing a Self Assessment Tax Return. There is no maximum amount you can make, although in higher tax bands, your earnings may become less tax-efficient.
You will be accountable for all liabilities, including all of your own assets and those jointly owned with another individual.
This structure is a frequent extension of the sole proprietorship that permits two or more individuals to co-own and operate a business. It enables individuals to pool their assets and abilities while sharing management and profit.
Similar to a sole proprietorship, a partnership is not a separate legal entity; consequently, the partners are personally liable for any debts and responsibilities. Each partner must register as self-employed and file their own tax return annually.
It is also advisable, at the outset of a partnership, to draught formal agreements outlining obligations and responsibilities to avoid any issues.
- Limited Liability Partnership (LLP)
An LLP is similar to a partnership, except that the partners’ liability is limited to the amount they invest in the business. The limited liability partnership must be registered with Companies House and HMRC. Additionally, annual accounts must be created and filed.
An LLP can be formed with two or more individuals or corporations as members. All members of an LLP are required to file a personal Self Assessment Tax Return annually, pay income tax on their share of the partnership’s profits, and pay National Insurance contributions to HMRC.
- Limited Company
Unlike sole traders, a limited liability company is a separate legal entity. This means that shareholders’ responsibility is limited to their investment and any unpaid shares they own. The business has its own liabilities, profits, and debt.
After paying Corporation Tax, the corporation retains any remaining profits. The earnings can only then be dispersed to shareholders in the form of dividends. Companies can be limited by shares or by guarantee, and they must file yearly reports with Companies House and HMRC.
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We have a proven track-record of dealing with company set-ups. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact our Corporate Solicitors
It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of reducing risk, saving you money and ensuring you achieve a positive outcome.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form . We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.