Business structure

One of the most important decisions you’ll make is around the structure of your business. Whether you operate as a sole trader, partnership, limited liability partnership (LLP) or limited company will make a huge difference to your statutory responsibilities and likely tax liability. We can provide advice and calculations to help you make the right choice.

Sole trader status is the standard for smaller businesses, especially those without employees – although sole traders can employ people, contrary to popular belief. It keeps administration simple, avoiding the need to register with Companies House or file a corporation tax return. At the same time, depending on your circumstances, it might also mean you pay more tax and face a greater degree of personal liability if the business gets into trouble.

Partnerships are a lesser-used structure which offer similar advantages and disadvantages to sole-trader status. It’s vital when setting up a partnership to make sure everything is agreed in writing, from the distribution of profits to roles and responsibilities.

LLPs and limited companies are both forms of incorporated business. These offer the potential to pay tax on profits at a lower rate but come with additional statutory responsibilities. Many businesses move to limited company status as they grow, with owners becoming company directors, whose personal assets are protected. They typically take payment as a mix of salary, below the personal allowance threshold; dividends; and pension payments.

Talk to us for thoughtful advice on business structure that takes into account your circumstances, business goals and long-term plans.