Congratulations on considering starting your own business! With this decision, you have the power to call the shots and be your own boss. But before you dive in, it’s important to carefully consider the type of business structure that will best suit your needs.
What options are available?
There are four main types of business structures to choose from:
• Sole Trader
• Limited Liability Partnership
• Limited Company
There is no one “best” way to set up a business. Each structure comes with its own set of benefits and risks, and the best option for you will depend on various factors. To help you make an informed decision, here are some things to consider:
Starting as a Sole Trader
If you’re looking for a simple and easy way to set up your business, becoming a sole trader may be the way to go. There’s minimal paperwork and legal obligations at the start, and you’ll just need to register as self-employed for tax purposes. While you should still keep good records for your own benefit, there is no requirement to make them public.
Setting up as a Limited Company
Setting up a limited company requires more time and effort, as you’ll need to register with Companies House and file ongoing public documents. You’ll also need to carefully consider who will act as directors and how shares will be distributed. For more details, check out our factsheet on “How Do I Incorporate a Company?”
A partnership can be a great way to run a business with someone else. However, it’s important to have a partnership agreement in place that outlines each partner’s responsibilities and rights. See our factsheet on partnerships for more information.
Trying Out a Limited Liability Partnership
A Limited Liability Partnership (LLP) combines elements of both a partnership and a limited company. It’s often used for professional firms, such as accountants and lawyers, as it offers the protection of limited liability while maintaining some informality.
Consider the Risks
As a Sole Trader, you are personally liable for any debts your business may accrue. Limited companies and LLPs offer some protection against this, but partnerships still carry shared financial risks.
Planning for the Future
It’s important to keep in mind that your chosen business structure can affect how your business is perceived in the industry. For example, sole traders are sometimes seen as “one-man bands,” while limited companies are often viewed as more credible. Remember, you can always change your structure as your business grows, but there may be costs involved.
Navigating Taxes and Names
The tax obligations for each business structure are different, so it’s best to consult an accountant or tax advisor for specific advice. Additionally, be sure to check that your business name is not offensive or misleading. Sole traders and partnerships can trade under their own name, but limited companies and LLPs must register their name with Companies House and include “Limited” or “LLP” in the name.
Don’t Forget to Secure Your Online Presence
No matter which business structure you choose, it’s important to check if the corresponding website or domain name is available. You can do this at Company Secretarial Software – Inform Direct
Ready to Take Charge?
By considering these factors and exploring your options, you can confidently choose the right business structure for you and your new venture. Now go ahead and make your dream of being your own boss a reality!