Limited Company or Sole Trader/Partnership? Which is better for you?

One of the biggest decisions a budding entrepreneur or businessman has to make is to decide what kind of company structure he envisions for his future business. There are several options open to entrepreneurs who are forming their startup business. The options open to the entrepreneur are:

Form a Limited Company
Sole Proprietor/Partnership
Each of these options have their own benefits and limitations, it is up to the entrepreneur to decide what structure will benefit him the most:

Limited Company

A big number of entrepreneurs opt top form a limited company. A limited company gives business owners more tax advantages and also transfers any risks from the individual to the company.

Setting up a limited company can be done either online or hire a company formation expert to do it.

Accountants can also do the task for setting up the limited company for free but based on the condition that the entrepreneur will sign on as a client. An entrepreneur can choose this option if he already has an accountant whose service he is satisfied with.

The next step to do after forming a limited company is hiring a company secretary. The secretary fulfills a legal limited company formation requirement of recording company meetings and performing administrative responsibilities. Since this role is only minimal and not a crucial position. A lot of business owners usually appoint a business partner or parent for this position.

Sole Proprietor/Partnership

A sole proprietorship (trader) and a partnership are both forms of self-employment. A partnership basically means that there are two or more people who claim ownership of the business. Both these options are considered the simplest methods in which to trade. Based on UK law, a partnership or sole proprietorship must keep all their invoices and receipts for six years as well as keep a detailed record of the money that was earned and the money that has been spent for the business. Additionally, a Personal Tax Return must be filed at the end of the tax year. The said income and expenses will then be declared at this point.

To register a Sole Proprietorship form SA303 must be completed. This form can be downloaded at:

http://www.hmrc.gov.uk/startingup/register.htm

Another option is to register with the Inland Revenue.

Being self-employed businessmen who enter into these two discussed options must pay their own self assessment tax and National Insurance contributions. Businessmen who undergo these tasks must be able to show details of their income, gains, reliefs, and allowances. A faithfully kept record will make these tasks easier.

It is recommended that business owners who enter into a Sole Trader/Partnership, unless their income is very small, should hire an accountant to perform these tasks in their behalf. It may be considered an expense but a good accountant can end up saving the company more money.

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