Brief introduction to Business structures
There are many different business types to choose from when starting a business, This choice is a very important decision and can have lots of legal and financial implications. Depending on the types of business you will also have different levels of responsibility for filing account s and admin. This article provides a brief introduction to the most popular business structures.
- Business is run by 1 person
- Business can still have employees
- You are accountable and responsible personally for all debts
- You keep all profits after tax
- You are personally responsible for tax and administration.
- You must register with HMRC, you can register after starting but may get a fine if you go over the agreed time limit.
- You must complete a Self-assessment form each year to assess the tax liability.
- You have to pay NI contributions.
- You only need to register your business for VAT if you exceed a turnover of £81,000.https://www.gov.uk/vat-registration/overview
- The Company is responsible for the finances of the business and not you personally
- You choose the Directors, and Shareholders/holdings which will be detailed in your articles of association.
- The Directors have legal responsibility for the company
- The Company is responsible for its own corporation tax (currently at 20%)
- The Company will pay you an income and possibly a bonus linked to profits.
The Directors are responsible by law-
To try to make the company a success
They must comply with the articles of association for the company
Disclose any conflict of interest
Ensure compliance with the HMRC rules and accounts
Register for self assessment and submit a return each year.
Failure to comply and the director(s) can face prosecution.
Your Company will legally exist once you have registered it at Companies House, giving the name of Company and Directors, they will then issue a certificate of incorporation which proves the company is now legally registered.
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