One of the most important choices you will make when you go into business is deciding on the best business structure for you.
At Salhan Accountants, we can provide expert advice on the different options, help you assess the advantages and disadvantages or each and decide on the most appropriate structure. There are four main business structures, which are set out below with some of the key points relating to each of these.
Sole trader: these businesses are owned and run by one person. Such a business is easily set up and the business accounts are confidential. However, sole traders are personally responsible for all business debts and liabilities.
Accounts need to be prepared annually and are used to complete the sole trader’s self assessment tax return. Sole traders pay income tax and national insurance on profits made, not on funds withdrawn from the business, and may need to register for VAT.
Partnership: this structure involves two or more people owning and running a business and sharing the profits in an agreed manner. The partners are personally responsible for all business liabilities and each may be responsible for the whole of any debt (other than income tax) if the other defaults.
Accounting records are similar to those of a sole trader and are confidential. Partners are also taxed in a similar way to sole traders.
Limited liability partnership (LLP): an LLP exists as a separate legal entity, which means the liability of partners is limited in most cases. Like a limited company the LLP’s accounts must be filed at Companies House and its financial statements made available to the public but the partners’ tax treatment follows that of a traditional partnership.
Limited company: a limited company exists as an independent legal body, separate from the people who own it. Directors and shareholders are not personally responsible for the company’s debts, except in exceptional circumstances.
The company must register with, and submit annual accounts to, Companies House, along with an annual return to Companies House, updating certain company details. Limited companies pay corporation tax, while their employees pay income tax and National Insurance contributions.
To find out more about how we can help you, please contact Salhan Accountants in Edgbaston, Birmingham.