When starting a new business there are several organisational structures available. Each structure has particular advantages that will suit a particular business, and forming your company with the wrong structure may put your business at a disadvantage.
Business main structures available are:
- Sole Trader
- Limited Liability Company
- Limited Liability Partnership (LLP)
The simplest structure for any business is as a sole trader, as there are the least number of regulations and obligations. You will have total control over your business and keep all profits after tax. Record keeping and accounts are quite straightforward, but the main disadvantage is raising finance for the business. You are therefore liable for all debts that are incurred.
A private limited company is the most common form of a limited liability company and will have at least one shareholder. This structure allows for business and personal affairs to be kept quite separate. The company is a separate legal entity and only the company is responsible for its debts. One disadvantage is that there are statutory rules that must be complied with.
In a partnership, ownership of the business is shared between two or more people. The partners share the risks and liabilities, management of the business and profits. However as a partner you will be liable for any debt of the partnership.
A limited liability partnership is similar to a partnership and limited liability company, except that the liability of the partners is limited to the amount of money they have invested in the business. The company must be registered at Companies House the same as with a limited company.
Taking advice from a solicitor at an early stage of planning will help save money in the long term. Commercial Partner, Matthew Fretten, says “I strongly recommended consulting a commercial solicitor before you start a business. They will also be able to draw up a partnership agreement or shareholders agreement where necessary and help you prepare your business contracts and terms and conditions of trading.”
Frettens are pleased to offer a free initial consultation for all new clients. We have always offered this service because we recognise the importance for clients of deciding whether they can work with a particular solicitor and to find out more about the process and likely outcome. Contact Matthew or a member of our Commercial Team on 01202 499255 to arrange a free, no obligation initial appointment at either our Christchurch or New Forest office.