I want to start a business, what structure should I use?

Beginning a start up can be exciting but comes with new challenges. So many questions to answer, so much to learn , and a lot of hast to put on until you can employ the staff to take care of different tasks.

The structure you choose has different implications on how you account for finances in your business and pay your taxes. It also impacts on the liability you have as the owner.

There are 4 main types of business structures that are commonly used:-

• Limited Company

• Self Employment/Sole trader

• Partnership

• Limited Liability partnership

• For charities - company limited by guarantee or charitable companies

Sole trader

This the simplest form of business structure to adopt. It can be registered for VAT also. Simply inform HMRC that you intend to trade and you will be issued a self assessment tax number. HMRC will expect a self assessment tax return annually where you will record all sales made and deduct your business expenses. Taxes are paid on the profits

Limited Company

This is a business owned by shareholders, run by directors and which is a separate entity from the owners. The liability of the company is often limited to its share capital. The company is responsible for everything it does and everything purchased and sold through this entity belongs to the company. In addition, any profits generated by the company after paying Corporation Tax is retained by the company but can be withdrawn or paid out as dividends to its shareholders. This structure has administration obligations to both Companies House and HMRC.

In the next post I will discuss the other 2 business structures