So you’re an aspiring entrepreneur looking to set up your own business. You have a product or service to sell, and know which sector you would like to operate in. But there is 1 thing still to decide – what type of business do you want to register or trade as?
What you register your business as will depend on the following things:
- the type of business you’re running
- which sector you work in
- taking people on to help out with the business.
There are main 3 business structures you can register your business for, each with its own responsibilities.
So which structure is right for you?
This is the easiest form of doing business, where you are personally responsible for managing your profits and losses.
Being a sole trader means running your business as an individual. To set up as a sole trader, you need to register for self-assessment.
Responsibilities as a sole trader are straightforward, such as recording your sales and expenses, sending an end-of-year tax return and paying class 2 and class 4 national insurance contributions.
VAT registration may be needed if your business turnover is more than £85,000.
If you choose to work with 2 or more people, then registering as a partnership might be a good choice.
Business responsibilities are split between you and your partners, in the same way as profits and losses.
Partners will need to pay tax on their individual shares of the profits.
There are 3 types of partnerships you can register as:
- business partnership
- limited partnership
- limited liability partnership.
Setting your business as a limited company means businesses finances are separate from your personal finances.
Limited companies are owned by shareholders and run by directors. Once registered, directors are responsible for doing:
- reporting company records and changes
- filing annual accounts
- paying corporation tax, PAYE and national insurance
- file VAT returns (if applicable)
- comply with auditing requirements.
Talk to us
This blog post is just an overview of the business structures available. If you’re still unsure on which approach is best for you, get in touch with us and we can advise on the best strategy for your business.