Choosing a Business Structure
You must choose a structure for your business.
This structure will define your legal responsibilities, like:
- the paperwork you must fill in to get started
- the taxes you’ll have to manage and pay
- how you can personally take the profit your business makes
- your personal responsibilities if your business makes a loss
You can change your business structure after you’ve started up if you find a new structure suits you better.
Types of business
The main types are:
The advantages of being a sole trader are that it is easy to set up your business, as well as few start-up costs and low regulation.
However, you will be liable for any business debts, and it may be harder to raise finance.
A private limited company has limited liability and will be more likely to raise finance. You business will also appear more credible that a sole trader on face value.
The downside is you will undergo more regulation and are required to submit annual accounts and returns.
A business partnership is easy to set up, with work being shared among the partners, and is not overly regulated.
The disadvantages are that decision making can sometimes be problematic and disputes can easily arise. Partners are also personally liable for business debts.
Limited liability partnership
A limited liability partnership (LLP) offers limited liability for the business owners, and is generally easier to raise finance for than a sole trader.
However they include more annual paperwork and regulation.
You can also form an ‘unincorporated association’ if you’re setting up a small organisation like a sports club or a voluntary group and don’t plan to make a profit.
You can use other structures for businesses that help people or communities, eg ‘social enterprises’.
The GOV.UK website has further information on choosing the legal structure for your business.
Taking on a franchise to short-cut the business start-up process
Many people have found their successful route to starting a business through joining a franchise.
It’s well worth taking advice from as many people as you can first. A good starting place is The British Franchise Association.