(Getty)
Tax, employment legislation, and insurance are just a few of the issues you’ll have to consider when you decide to set up a new business. You’ll also have to be aware of export legislation, if you think of expanding overseas. Software experts Sage suggest that annually 500,000 people set up in business in the UK.
What are the legal definitions?
There are four legal entities that you need to consider when setting up in business.
- Sole trader
- Limited company
- Business partnership
- Limited liability partnership
These classifications mainly refer to the size of your company, and how you’ll pay your tax, and national insurance. This type of definition will also help you should the business fail and there are outstanding debts to be paid. Vanner Perez Notaries, among other legal firms, will be able to help you with the certification of any documents, especially if you decide to enter the export market.
Sole Traders
If your business is small and you just want to ensure that you get the correct tax allowances on your annual return, you will have to register for self-assessment with the tax office. You will have to keep detailed records of your outgoings and income as well as all expenses.
Limited Company
A limited company has to be registered at Companies House. You must keep your personal expenditure separate from your business spending, and you’ll also be liable for corporation tax, rather than just income tax. If you want to find out more about this type of legal framework, have a look at the government website.
Business Partnership
This is where you go into business with a group of people. You are all responsible for the health of the business, and each partner will have to pay tax on any profits. One of you will be the ‘nominated partner’, which means that the book keeping, tax records and all other record keeping will be that person’s legal responsibility.
Each of the partners will have to register as self employed with HMRC, and you will all be responsible for any debts the partnership will incur. The website bytestart has some useful information about partnerships. If a partner resigns or dies, you will be legally required to dissolve the partnership and inform HMRC.
Limited Liability Partnership (LLP)
Doctors, lawyers and accountants often use this structure. Unlike a business partnership, if you set up a LLP the responsibility should the business fail depends on the amount of money each partner has invested, rather than the debts of the partnership taken as a whole.
Getting It Right From the Start
Once you’ve decided on the legal framework for your business, you will be able to get guidance about how to stick to all the rules and regulations that these definitions entail. Though International Business Times recently pointed out that 25 percent of 732 UK business owners surveyed by the company Voucher Codes Pro UK regret setting up their business.