All you need to know but were afraid to ask about choosing the right way to trade………….
What are the options ?
- Sole trader
- Limited Liability Partnership (LLP)
- Limited Company
This is simply where you are trading in your own name and you are your own boss !!!
This is where two or more people are trading together. It’s not compulsory, but you may need a partnership agreement. Warning : joint and several liability can be an issue because you may be liable for your partners’ debts !!!
A hybrid between a partnership and a company. It has limited liability and is taxed in similar way to a partnership. However, it is useful because some professions are not allowed to incorporate.
You need to consider all the pros and cons
Limited liability is an important pro. However, flexibility is also important especially with regard to the control of the company (who the shareholders are) and tax planning.
Companies can be costlier to run, including the initial costs and accounting costs. There is also more admin and greater responsibilities eg annual returns and submissions to Companies House.
The above is really just a brief snapshot of some of the considerations. However, I am always happy to do some number crunching and to provide worked examples.
Stuart Harris FCCA is a director of Stuart Harris Associates Limited. He is a friendly accountant who operates mainly in North and North West London, including Finchley, Totteridge, Mill Hill, Hendon, Barnet, Hertfordshire and Enfield. However, he has also been known to travel within the M25 area, and with the internet is able to communicate worldwide.
You can e-mail him on firstname.lastname@example.org