Company Formation

We take a real interest in business startups.

40% of new businesses will fail in their first year so it is vital to get good support and advice to avoid becoming a first year statistic.

Operating a business tax efficiently is a key concern to all clients. The choice of a suitable business medium, for example, sole trader, partnership or limited company may have a substantial impact on the level of reliefs, allowances and tax levied on you and your business. It is, therefore, essential to review the key issues to enable you to minimize tax liabilities.

Sole trader

You’re a sole trader if you’re running your own business as an individual. You can keep all your business’ profits after you’ve paid tax on them. You can take on staff - ‘sole trader’ means you’re responsible for the business, not that you have to work alone.

Legal responsibilities

You’re personally responsible for:

• Any losses your business makes.
• Bills for things you buy for your business, like stock or equipment.
• Keeping records of your business’ sales and spending.

You must register with HM Revenue & Customs (HMRC) as soon as you can after starting your business. If you register later than 5 October in your business’ second tax year, you could be charged a penalty.

Unincorporated business

The taxable trading profits of a business run by an individual as a sole trader are taxed directly on the owner, irrespective of whether the owner draws the money from the business for personal use. The same applies to the profit share of a general partner in a partnership (including a member of a Limited Liability Partnership).

The principle applies for both income tax and NIC. One disadvantage of owning an unincorporated business is that it results in unlimited liability for its owners since it has not been formally registered as a corporation.

Incorporated business

Incorporated businesses, also called corporations, are distinct from sole proprietorships and partnerships in a number of ways. Corporations feature unique benefits that give them an advantage over other business types, but there are drawbacks to the corporate structure as well. Small businesses consider incorporating for a number of reasons, including expansion, efficiency of operations and liability protection. The most obvious difference between a corporation and other business structures is the ability of corporations to raise large sums of money by selling stock shares to investors. Incorporated businesses are considered legal entities in the eyes of the law. This means the company is liable for its own taxes, debts and the consequences of any legal actions, and has the right to conduct business and initiate lawsuits under its own name. This concept, referred to as limited liability, implies that business owners cannot be held liable for a corporation's debts, as is the case with sole proprietorships and partnerships. Because of this, the owners-stockholders-only stand to lose the amount that they invested in the company if things go sour with the company's finances.