When starting a new business it is important that you consider which business structure is right for you. The most common structures for a new business are acting as a sole trader, trading via a limited company; or setting up as a limited liability partnership. There are many other structures available, such as public limited companies, unlimited company, company limited by guarantee or traditional partnerships, however these are less frequently used. The main structures used for new start ups are explained here:
Sole Trader
Some people decide to start their business trading as a sole trader. This method can be cheaper than setting up as a limited company as there may be less administrative work required. However, a significant disadvantage in this structure is that the owner has unlimited liability. This means that if the business is in debt the owner’s personal assets can be at risk in order to pay back the debt. Sole traders deal only with HM Revenue and Customs and not Companies House.
Private Limited Company
A private limited company is a business structure in which the business is owned by shareholders and run by directors. The Directors are appointed by the shareholders. Limited companies are registered and regulated by Companies House and need to file annual accounts and returns with them. Private limited companies offer the shareholders and directors limited liability, meaning that if the company is in debt their personal assets will not normally be at risk. A limited company may also offer tax advantages when a business is making a certain level of profit. However this must be offset against the extra administrative costs of running a limited company.
Limited Liability Partnership
Limited liability partnerships offer some or all of its members limited liability. It is mainly used by professionals such as accountants or lawyers and in some circumstances has useful tax advantages. However because the use of this structure is less common it can be more expensive to complete the administrative work relating to this type of business structure.
Wisteria Formations can complete your limited company formation online. You can begin here: http://www.wisteriaformations.co.uk
