What business structure is right for you?
You’ve made the decision to be your own boss, congratulations! But have you decided which business structure is best for you?
Here we take a look at some of the options available.
Sole Trader
Someone that is self-employed and runs their own business as an individual is deemed to be a sole trader. This means that you and your business are one, and it is not classed as a separate legal entity like a Limited Company. As a result you have full liability and all of the business risk.
A sole trader must register with HMRC and submit a self-assessment tax return each year. This will detail the income and expenditure of the business, and calculate what tax and National Insurance is payable.
Partnership
A partnership is two or more persons that are in business together and share any profits or losses. The profit or loss is shared between the partners, in line with the profit sharing ratio. Each partner then pays tax via a self-assessment tax return.
Each partner shares liability and business risk.
Limited Liability Partnership (LLP)
Similar to a partnership except each partner has limited liability up to the amount they invest in the business. The LLP must be registered with Companies House in the same way as a Limited Company. Accounts must also be filed on an annual basis.
Two or more partners can make up an LLP, and the share of profits is laid out in the agreement. All partners must submit a self-assessment tax return to pay any tax and National Insurance on their share of the profits.
Limited Company
A Limited Company is a separate legal entity from you as an individual. That means that any liability is separate to you and if the worst should happen and the company gets into trouble, the directors are only liable by their shareholding.
A company is formally incorporated by Companies House and must have at least one director and shareholder. As a director you are responsible for the day to day running of the company. A shareholder owns the shares in the company.
Accounts and a company tax return must be submitted each year to determine the corporation tax liability on any profit made.
How Taxevo can help
If you’re new to self-employment you’ll have a lot of decisions to make before you get started, so why not let Taxevo take some of the stress away and help you get going? Our team of expert accountants can advise you on which business structure is right for you, based on your own personal and professional circumstances. Get in touch today to find out more, or take a look at our prices. We look forward to hearing from you!