COMPANY, PARTNERSHIP OR LLP
Why is it important to choose the correct company structure?
When you are setting up your new business one of the things you will need to decide is what structure is best suited to your business both now and in the future. There are several different legal structures you can choose from and each will have consequences relating to:
- The amount of tax and National Insurance that you pay
- The way your business can raise money
- Your financial liability
- The way decisions are made about the business
There are advantages and disadvantages of setting up your business as a Limited Company, Partnership or LLP and the decision you make can have a large effect on your financial future.
JWK Solicitors have a wealth of experience in this area and can provide advice and guidance on the best way to set up your business.
What is a Limited Company?
The features of a Limited Company include:
- Company directors have a number of legal and financial responsibilities including dealing with Companies House
- Directors of the company have limited liability, unless they have provided personal guarantees when securing business finance
- Shareholders are only liable for the amount of money they have invested in the shares
- Corporation tax is charged on the profits of limited companies
- The directors run a Limited Company and the shareholders own it
- If your turnover is greater than the threshold set you must register your company for VAT
- Limited companies may need to fill in an Annual Return and send it to Companies House each year
- A Limited Company can provide a professional image for your business and may be a requirement in some situations
- The costs involved in setting up a Limited Company are very low
- You will require a registered office where legal documents can be sent. However, this does not have to be your trading address.
What is a Partnership?
The features of a Partnership include:
- Two or more people agree to trade as one business and jointly share profits and losses
- It is similar to operating as a sole trader and partners are personally liable for any debts incurred
- The partnership has no legal status like a Limited Company
- You do not need to notify Companies House or deal with any administration or accounting requirements
- Each partner will need to inform HMRC that they are self-employed and accounting can be much more straightforward
- Both the individual partners and the partnership itself will need to submit annual self-assessment forms to HMRC and keep up to date records of all business transactions
- If any of the partners leave the business it may lead to the partnership being dissolved
- You should always consult a solicitor to draw up a partnership agreement to detail how the business will run and what will happen in the event of a dispute or change in circumstances
What is an LLP?
The features of a Limited Liability Partnership (LLP) include:
- An LLP is a mixture of both a Limited Company and a Partnership
- The LLP is registered at Companies House and is treated like a Limited Company apart from that the profits made are divided between the partners who pay tax on their own share
- An LLP needs to have at least two partners. The partners can be individuals or businesses.
- An LLP is not a popular option for a small business or new start up
- It is recommended that a Members Agreement is put together by a qualified and experienced solicitor to detail how the LLP is run and the responsibilities of the members.
JWK can help you. Get in touch today
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