Is Incorporating Small Business Best for You?

Incorporating small business (LTD Company)Partnerships and Sole Trader are but a few various business structures or in other words the legal structure for running your small business?

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

Partnerships
Partnerships limited Liability (LLC)
Private Limited Company Ltd (incorporating small business)
Public Limited Company (incorporating small business)

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 or you risk a £100 pounds penalty charge.The number for 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,calculated annually from your self assessment tax return. Unfortunately as a sole trader you have no personal protection (unlike a Ltd company/incorporating small business) 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.

Incorporating small business /Limited Company will limit your liability to that of the companies assets and not you personally more on this later.

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/incorporating small business) you have no real protection so all partners are equally liable for debts owed by the partnership, your personal assets/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.