The way you structure your business can significantly impact how you're taxed and the legal responsibilities you shoulder. Here's a breakdown of the most common structures:
Sole Trader:
• You and your business are one entity legally and tax-wise.
• Profits are taxed as your income.
• Easier to setup with less paperwork and fewer ongoing obligations than a limited company.
• Personal liability for business debts.
Partnership:
• Similar to a sole trader, but with multiple owners (partners).
• Partners share profits (and tax burden) based on ownership percentages.
• Each partner files a self-assessment tax return.
• Partners are personally liable for business debts.
Limited Liability Partnership (LLP):
• Combines some features of a partnership (internal management, profit sharing, tax) with the limited liability benefits of a company.
Limited Company:
• A separate legal entity from its owners (shareholders).
• Offers limited liability protection for owners.
• Requires registration with Companies House, annual accounts submission, and adherence to regulations.
• Profits are taxed under corporation tax, not as personal income.
• Potential tax advantages.
Choosing the Right Structure:
Remember, you can change your structure later, but choosing wisely from the outset can save you time, money, and hassle down the road. Please talk to us today if you would like to discuss your options.
