Best Business Structure for You
Sole Trader - Partnership

Which business structure is best for you when starting out in business, Sole Trader or Partnerships?

We will cover the most popular business structures here, so you will have an idea of which one is best for your business needs. The most popular choices are listed below:

Sole Trader
Partnership
Limited Liability Partnership (LLP)
Limited Company

Sole Trader

For most people the easiest form of self employment is to begin as a sole trader.

You will need to Register with HER Majesty Revenue & Customs,(HMRC) registration is free and you need to do this within three months of starting your business or you risk a £100 pounds penalty charge.The number to call HMRC IS 0845 915 4515 (Self Employed Help line or Download Form To Register)

As a sole trader you are in full control of your business and need to keep records of your income and expenditure e.g. receipts of any money you spend on your business, utilities, stock etc and also any money that your business makes through your services or product.(income)

You get to keep all the profits that the business generates, but as you are self-employed your profits are taxed as income and you will have to make an annual self assessment tax return to the HMRC.

You are also liable to pay class 2 contributions a flat rate for self-employed people and also class 4 contributions depending on how much profit your business has made.This is calculated annually from your self assessment tax return. Unfortunately as a sole trader you have no personal protection (unlike a ltd company) you are personally liable for any debts that your business may incur whilst you are trading.

So be warned that your home and any personal assets you have may be at risk... but saying that, as long as you are sensible with your finances and investments you should not have any real problems.

Download a Form Here to Register as Self-Employed Right Click And Save Link As To Download to Your Computer.

Partnerships

Another popular legal structure if you don't want all the responsibilities of being a sole trader is to share the responsibility with a business partner/s in the form of a partnership. This may be a easier way for you to set up your business as you will have other people to share in the decision making process.

Again each partner registers as self employed with HMR & Customs. It is also advisable to have a written agreement between all partners drawn up to keep everything professional and running smoothly. Each partner takes a share of the profits and the partnership must keep records of income and expenditure.They will each have to submit a separate annual self assessment tax return to HMR&C.

Each partner is liable to pay class 2 contributions a flat rate for self-employed people and also class 4 contributions depending on how much profit your business has made. Again(unlike a ltd company) you have no real protection so all partners are equally liable for debts owed by the partnership, your personal assets and home may be at risk.

Okay ! so we have covered the first two most popular business structure on this page.The next page explains the following business structures.