There are various different structures which can be adopted when setting up in business. Nicola Roby of CHW Small Business Accountants in Bolton explains the different options and which might be correct for you and your business.
When setting up your company and registering it, there are a number of options you could choose, for example a limited company or sole trader business. The choice you make will depend largely on the amount and type of taxes you pay, along with other benefits and drawbacks. By choosing the wrong business type, you could end up paying more tax than necessary, which is why it’s important to involve an expert accountant to help you set up your business.
The different types of company structure:
This entity is simple to set up and manage. You’ll be entitled to all of the profits of the business, but you’ll also be personally responsible for the debts. Accounting and reporting requirements are quite simple but income tax and NI must still be paid on profits.
This structure is similar to that of a sole trader but with more people involved. All partners are equally entitled to profits and liable for debts. Whilst this arrangement can allow you to easily bring funding and knowledge into your business, there can be problems if disagreements between partners occur.
Limited Company (LTD)
An LTD company is its own legal entity which reduces your personal liability for business debts. Tax rates can be more favourable but the accounting and reporting responsibilities are more onerous.
Being an LTD can add credibility to your brand.
Limited Liability Partnership (LLP)
This option can combine the best of a partnership and a limited company. The profits are taxed as income of the business partners. Once registered LLPs must begin trading within a year. An LLP can be a great way to bringing expertise into your business without increasing your risk.
For advice on setting up your small business contact Nicola at CHW Small Business Accountants on 01204 534031 or via our contact us page.
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