With the New Year, come New Beginnings. One of these for many people is to start a new business, and the structure that is created is important.
There is no particular structure that suits every business or person – each has their pros and cons. The main thing to realise is the importance of seeking advice from an accountant if you are unsure of the long term implications.
The two most common structures are Limited Company and Sole Trader.
Advantages - Perception of being more professional, Company is separate to directors and shareholders, Company itself is liable for its debts, unless as director - personal guarantees have been given, Flexibility in profit extraction.
Disadvantages - Increased administration – Companies House and HMRC, Public have access to how the company is doing via accounts filed.
Advantages - Simple, All profits after tax go to you, Reduced administrative burden, If work from home, generally more expenses that can be claimed IF used for business.
Disadvantages - Personally liable for business debts – extreme case, you can lose your home