Business Set-Up

When setting up and registering your business you need to decide what business structure you are going to use. I am only going to cover the 3 most popular types of business structures which are:
There are of course other options such as community interest companies (CICs), and Limited Liability Partnerships (LLPs). If the three options I am covering here do not suit your needs then please seek advice from a professional to advise you further.
- Sole trader
- Partnership
- Limited Company
There are of course other options such as community interest companies (CICs), and Limited Liability Partnerships (LLPs). If the three options I am covering here do not suit your needs then please seek advice from a professional to advise you further.
Sole Trader
A sole trader is a business of just one person that is registered as ‘self-employed’ with HMRC (www.hmrc.gov.uk). If you choose this route you will need to submit a self-assessment tax return to HMRC each year which declares the income and expenses of the business.
Ultimately a sole trader is a one-person business owner in charge of everything, and you would be known as being ‘self-employed’.
A sole trader is a business of just one person that is registered as ‘self-employed’ with HMRC (www.hmrc.gov.uk). If you choose this route you will need to submit a self-assessment tax return to HMRC each year which declares the income and expenses of the business.
Ultimately a sole trader is a one-person business owner in charge of everything, and you would be known as being ‘self-employed’.
Partnership
A partnership is a business of two or more people that are in business together with the intention of making a profit. The partnership has to be registered with HMRC. You will need to submit a partnership tax return each year which declares the income and expenses of the business and declares what % of the profits are attributable to each partner.
The profits attributable to each partner also need to be declared on the individual tax returns for each of the partners, therefore each partner will also need to register with HMRC as a partner in the business. This is so that HMRC issue each partner with a tax return as well as the partnership. One of the partners will need to be appointed as the lead partner and he/she will be responsible for filing the partnership tax return.
The profit percentage attributed to each partner can vary each year but should be agreed between the partners accordingly in advance.
Many partnerships do not bother with an official partnership agreement that outlines what happens if someone wants out, or someone dies etc, and where no partnership agreement is in place then the Partnership Act from 1890 will be deemed to apply. Yes, I did say 1890, the partnership act hasn’t been superseded since 1890 therefore I would always advise that you seek legal advice to put a partnership agreement in place so that all partners know where they stand.
A partnership is a business of two or more people that are in business together with the intention of making a profit. The partnership has to be registered with HMRC. You will need to submit a partnership tax return each year which declares the income and expenses of the business and declares what % of the profits are attributable to each partner.
The profits attributable to each partner also need to be declared on the individual tax returns for each of the partners, therefore each partner will also need to register with HMRC as a partner in the business. This is so that HMRC issue each partner with a tax return as well as the partnership. One of the partners will need to be appointed as the lead partner and he/she will be responsible for filing the partnership tax return.
The profit percentage attributed to each partner can vary each year but should be agreed between the partners accordingly in advance.
Many partnerships do not bother with an official partnership agreement that outlines what happens if someone wants out, or someone dies etc, and where no partnership agreement is in place then the Partnership Act from 1890 will be deemed to apply. Yes, I did say 1890, the partnership act hasn’t been superseded since 1890 therefore I would always advise that you seek legal advice to put a partnership agreement in place so that all partners know where they stand.
Limited Company
A limited company is a business that is registered with Companies House, (www.companieshouse.gov.uk) there can be as many directors and shareholders as you want there to be. As the sole person in the business you will normally be the sole director and sole shareholder of the company.
Being a limited company means that anyone can access the Companies House register and see who the directors and shareholders of the company are, this can be useful if you are intending to contract with large corporate companies as they are likely to want to check out who you say you are before signing with you.
If you are a sole trader you tend to end up staying under the radar a bit more until you have a trading history that is picked up by the credit reference agencies, but this means it is hard for any potential customers to verify who you are.
A limited company is a business that is registered with Companies House, (www.companieshouse.gov.uk) there can be as many directors and shareholders as you want there to be. As the sole person in the business you will normally be the sole director and sole shareholder of the company.
Being a limited company means that anyone can access the Companies House register and see who the directors and shareholders of the company are, this can be useful if you are intending to contract with large corporate companies as they are likely to want to check out who you say you are before signing with you.
If you are a sole trader you tend to end up staying under the radar a bit more until you have a trading history that is picked up by the credit reference agencies, but this means it is hard for any potential customers to verify who you are.
More details of how to set up as a sole trader, partnership or
limited company can be found in our FREE ebook - fill in your details below to access
limited company can be found in our FREE ebook - fill in your details below to access