Choosing the right business structure

1210112_37589817

One early decision you will need to make about your business is its structure. Here’s a little bit of guidance to help you …

The main business structures are:-

Here are two reasons not to worry too much about what might seem like an enormous decision:-

  1. There’s no definitive right or wrong decision
  2. It’s easy to change your mind later if what you decide now doesn’t work out perfectly for you

Seek professional advice from your accountant and decide which is the simplest structure your business plan will allow.

 

Sole trader

A common, easy to set-up business type for owner-run businesses.

Just a little bit positive…

Just a little bit negative…

Just a little bit technical…

 

Partnership

Like a sole trader, but for more than one person – common when friends or husband/wife come together to build a business.

Just a little bit positive…

Just a little bit negative…

Just a little bit technical…

Just a little bit of advice…

Prepare a formal partnership agreement to detail how the liabilities, ownership and profits of the business are split.

However friendly things may seem at the start there have been many friendships, marriages and lives ruined by things going wrong in business – it’s simply good sense to clarify things from the beginning.

 

Limited Liability Company (Ltd)

A Limited Company is a legal entity in its own right and has its own reporting requirements to Companies House and HMRC.

Just a little bit positive…

Just a little bit negative…

Just a little bit technical…

 

Limited Liability Partnership (LLP)

A hybrid between limited liability companies and traditional partnerships, and are especially suited to professional services companies.

Just a little bit positive…

Just a little bit negative…

Just a little bit technical…

 If the business you are starting is in the financial services space, for example, and you are hoping to grow it by attracting other professionals to join you it may be worth considering an LLP from the outset.

 

Please make sure that you seek professional advice when deciding on the best business structure for you and your business. Your accountant will guide you and make sure that you report the right information to the right authorities at the right time, and avoid expensive and unnecessary penalties.

If you would like any advice, please get in touch with me on 01542 841425 or by email accounts@traceybird.co.uk. I’m always happy to help.

Have fun!

Tracey :-)

Back