When you decide to open a business and have a business plan in place the next step is to identify which type of business structure is suitable for you.
There are quite a few options in the UK and listed below are 7 such options.
1 – Sole Trader is the most simple way of setting up the business. All you need to do is give HMRC a call and inform them about starting a business and request the registration. Once registered HMRC will allot a UTR number. You can call them within the first 3 months of your 1st invoice to register your Sole Trader Entity.
2 – A Limited Company is a more secure way of structuring your business entity as it’s a limited liability, your liability is limited up until the value of shares you have in the company. If something goes wrong in the company you can always close down and start fresh but if it’s a sole trader that is yourself you are likely to be risking your assets and property in the business.
3 – A partnership is useful if you are more than one person then you can set up a partnership. It is similar to a sole trader in terms of risks.
4 – A Limited Liability Partnership is a more secure option than a partnership. It gives you the protection of a Limited Company along with the structural benefits of a partnership. The taxes are also similar to a partnership.
5 – Community Interest Company. A lot of social enterprises choose this option as the structure locks in the assets and profits of the company and can be used only for the community purpose for which the CIC is established. One can only withdraw up to 35% of the profits and the rest needs to be reinvested. So be careful before opting for this structure.
6 – Charity is where you can register your business with the ‘Charity Commission’. So you could have a limited company that is registered with the company’s house as well as registered with the charity commission, alternatively, you could have an unincorporated Charity. Where it is only registered with the Charity Commission.
7 – A Limited Company by Guarantee do not have shares but has members instead of shares and the liability is limited by their guarantee. This structure is most commonly used by membership organisations.
Get in touch with us to choose the right business structure suitable for your business.