The legal structure of your business determines paperwork, tax and management options, including liability charges and the divide between personal and business tax.
Read on to find out about different legal structures and determine which one would be best for your business…
1. Sole Trader
Sole traders are personally liable for any business debts or legality issues and is a simple business structure which directly links the business to the owner.
Being a sole trader, you can still employ people and their wages will be paid directly from yourself, which is ideal for a business with low financial risks.
Sole trader businesses have an easy setup, a there’s one sole owner, low costs and easy exit strategies in case you no longer want to be involved within the business.
2. Limited Company
Unlike a sole trader business, a limited company has a separate legal and business identity from its owner, offering more personal financial protection when it comes to legal liability.
A massive benefit of being a limited company is that members are shielded from personal liability if the business’s debts and finances collapse, which comes as great peace of mind to many business owners.
Registering with HMRC and with companies house is also a part of being a limited company, as HMRC will deal with financing employees and clients.
Corporations are usually big companies that have expanded and are separate from their owners, with legalities completely independent from their owners. There are a varied number of different types of corporations, so it’s worth researching which you think would suit your business most.
The corporation structure is ideal for businesses that have great growth potential and teams (e.g. managing directors, managers, team leaders), with advantages including having limited liability, continuity and large amounts of capital.
That's it! those are the most common legal structures that you can choose from if you’re wanting to start or develop your own business.
If you’re interested in finding a business to buy, take a look at our businesses for sale and start researching!