Sole Trader? Limited Company? Partnership? Jargon Much!
Sole Trader? Limited Company? Partnership? Jargon Much!
This week I have had a lot of enquiries from clients who are looking to start new businesses and were wondering how to structure them. I thought I would try to give people a bit of understanding of the 3 main types of company structure. It’s a whole lot of jargon and can be quite confusing to someone new to business.
There are 3 main types of company structure:
Sole Trader
You’re a sole trader if you’re running your own business as an individual. You can keep all your business’ profits after you’ve paid tax on them. You are required to fill in a HMRC self-assessment Tax return annually. You can take on staff – ‘sole trader’ means you’re responsible for the business, not that you have to work alone.
Limited Company
A limited company is an organisation that you can set up to run your business. Every limited company has ‘members’ – people or organisations who own shares in the company. Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits with its shareholders. A limited company must have at least 1 shareholder and 1 director.
Partnerships
In a business partnership, you and your business partner (or partners) personally share responsibility for your business.You can share all your business’ profits between the partners. Each partner pays tax on their share of the profits.There are advantages and disadvantages of each type of company structure.
The company structure that is best for you would depend on your individual circumstances and it’s always a good idea to get professional help before starting out. If you are thinking about starting a new business and would like to discuss your options please contact me. Have a good weekend people!
Gurps
