If you’re looking to start a business, it’s important to choose the right business structure. That’s something you need to decide at the outset and before you begin trading – although you can change it at a later date if necessary as your business evolves. Your options are: limited company, business partnership and sole trader. The choice depends on what you plan to do with your business. The structure you choose will also affect your tax, legal and financial responsibilities, how you can take profits out of your business, and the amount of paperwork you’ll be required to complete – especially when you start operating and at tax time.
It’s a good idea to consider what clients you’ll be working with when you start your business, as some organisations may insist on trading with limited companies rather than sole traders. It offers them a degree of protection – and it offers you protection too by separating your personal assets from your business ones.
Setting up as a sole trader is relatively easy and involves contacting HMRC to register for self assessment. If you choose to go down the limited company route, it’s a little more complex to set things up and you’re required to register your business with Companies House. You will probably find it easier to have an accountant if you’re setting up as a limited company, although some people prefer to tackle the tax themselves.
