Are you looking to start a new business? If so, there are lots of things you need to consider at the very beginning and probably the most important of these is to decide which company structure to choose.
There are four main types of company structure: Sole Trader, Partnership, Limited Liability Partnership & Limited Company.
The structure you choose will dictate the paperwork you must fill in to get started, your tax and personal liabilities, exposures and benefits, how you can personally take the profit your business makes. It will also affect your ability to attract investors and ultimately how easy it will be to sell your company. So it’s worth taking advice to get it right first time as changing structures isn’t easy and may have tax implications.
Setting up as a Sole Trader is very simple – you just need to register your sole trader/self-employed business with HM Revenue & Customs (HMRC) – but make sure you do this as soon as possible otherwise you could be fined up to 100% of the tax due in addition to the amount of tax unpaid.
To set up a Business Partnership you must register your partnership and its members with HM Revenue and Customs (HMRC) for Self-Assessment. You must also register for VAT with HMRC if you believe that your VAT taxable turnover will be more than £82,000 per annum.
To set up a Limited Liability Partnership you need to register (‘incorporate’) online at Companies House. You need to choose a company name, have at least 2 ‘designated members’, have a registered address and create an LLP agreement. The LLP Agreement sets out how the LLP will be run.
To set up a Limited Company you need to register (‘incorporate’) online at Companies House. Ready-made limited company names are available to buy, alternatively, if you want to form a brand new limited company, you need to send a memorandum of association, articles of association and a completed IN01 form to Companies House. A memorandum of association details the limited company’s name, registered office and nature of business. It must be signed by the director(s) in front of a witness. The articles of association set out the rules for the running and regulation of the company and whilst you can pick up a template for this document it is advisable to bespoke your articles.
Amanda Friston l Senior Legal Counsel