CHOOSING A BUSINESS STRUCTURE

Your business structure can affect your tax position, your personal liability for the business, your ability to raise finance for the business, what records and accounts you need to keep, and how management decisions are made.  So it is important to get the structure right.  The Kay Johnson Gee accountants based in Manchester will advise you on the best structure for your circumstances.

The most widely used structures are:

• Sole Trader – is the simplest way to run a business as you don’t pay any registration fees, keeping records and accounts is straightforward and you keep all the profit.  However, you are personally liable for any debts that your business runs up, which can make it a risky option.  Also it can cause difficulties with your potential customers who may prefer to work with limited companies.
• Partnerships – is where two or more people share the risks, costs and responsibilities of being in business.  Each partner is self-employed and usually they share the decision-making.  They are personally responsible for any debts that the business runs up.  If one of the partners resigns, dies or goes bankrupt the partnership must be dissolved.  This makes a partnership relatively simple to run, but if the business fails the partners have no protection from any liabilities.
• Limited Companies – exist in their own right.  The company’s finances are separate from the personal finances of their owners.  Shareholders may be individuals or other companies.  They are not responsible for the company’s debts unless they have given personal guarantees.  However, if they have invested their own money in the company, they may lose it if the company fails.
• Limited Liability Partnership (LLP) – is similar to an ordinary partnership in that a number of individuals or limited companies share in the risks, costs, responsibilities and profits of the business.  However, liability is limited to the amount of money they have invested and any personal guarantees they have given to raise finance.  Therefore the LLP members have some protection if the business runs into trouble.

It is important that you choose the right structure for your circumstances, Kay Johnson Gee accountants will advise you on the business structure and company formation as appropriate.