When setting up your own company, probably the most important consideration (after deciding what your business will do!) is making sure you set it up using the most appropriate structure for you.
The three most common types are: Sole Trader, Partnership and Limited Company. Each has its own merits and benefits, so it is important you understand what these are.
You can carry out someonline business structure research to get a better understanding of how each structure works and its pros and cons etc. You may also wish to contact a specialist company for some free advice.
However keen you are to get your business set up and trading, it is important that you don’t make a rash decision as to how your company will be structured. Understanding what each type of structure means, as well as any financial implications (as well as how your clients may perceive you) will influence how your business operates as well as could affect your own personal finances (in certain situations).
For example, if you anticipate earning less than ￡50,000 a year, registering as a sole trader or as a partnership (if you are going in to business with someone) may be appropriate. Typically, you’ll pay less tax and will have fewer legal responsibilities.
On the downside, however, these types of structures, you (and any business partner you may have) are personally financially responsible for any debt in the business.
If, on the other hand, you expect to be earning over ￡50k annually, setting yourself up as a Limited company may be the most appropriate solution. Yes, there are a lot more legal responsibilities you need to adhere to, you may feel however, that the pros of being a Limited company outweigh these. If you’re in this bracket then you are doing very well for yourself, so keep your business safe from a number of modern threats, check out Thruinc, a secure file transfer service that could protect your company’s data.
To other businesses potentially looking to work with you, a Ltd. company is a more credible proposition than a sole trader, for example. And on a personal, financial level, your own finances are protected in the event that your company goes bankrupt or faces a lawsuit etc.
Setting up a charity or a voluntary not-for-profit group?
This is a completely different scenario and there are different options available. The Government website has a very easy to understandguide to legal structures that helps explain this a bit more in depth both for traditional businesses as well as other types of organisation (such as charities).
While this article may have left you feeling overwhelmed with what structure is most suitable for you, it really is not as confusing as it may seem. There are millions of businesses across the UK – and they all started in the same way you are about to.
There are plenty of resources both online and offline, as well as free advice from specialist companies, as mentioned before. So, take advantage of what is out there, weigh up your options, and then you can make an educated decision as to the way forward.