The prospect of setting up and running your own business is exciting, if a little daunting. Making sure you choose the relevant legal structure for the formation of your company is very important. Getting it right at the start will help you to save the time and money involved in changing status in the future.

Your four main choices are:

• Sole trader
• Partnership
• Limited company
• Limited Liability Partnership

P S Bookkeeping and Accountancy of Colchester are here to help you understand the different types of company formation and pick the right structure for you. There are many factors you will need to take into consideration in order to select the format which suits you. One of the most important decisions you will have to make is how much liability you will take for company debt, tax, administration, and your company’s reputation.

Will You Be a Sole Trader?

If start-up costs are low and you don’t need to borrow any money, you might decide to be a sole trader. However it is worth considering every angle, as being a sole trader leaves you, and you alone, responsible for bills and commitments made on behalf of the company.

As a sole trader you can find yourself in a lonely position. You might find that the perks of being your own boss are weighed down by being entirely responsible for the path you choose. Not only are you accountable for debt, you are also answerable to future predicaments; assets such as your house are also at risk.

Will You Enter into Partnership?

A partnership is ideal if you are looking to offer services alongside a longstanding friend. Builders and service companies are often partnerships.

All partners are accountable for debts owed by the business. Any debts you incur as a partner, or your partners incur, will be the joint responsibility of all partners. It’s worth paying close attention to the behaviour of those you plan to go into business with.

Will You Form a Limited Company?

Personal risk is limited to how much you invest in your venture and the personal agreements you make in order to secure finance. Should a limited company go bankrupt whilst still owing money, the creditors are paid with funds accrued by the sale of its assets. Your personal credit rating should not be affected by your company’s activities.

By drawing up a memorandum of association and producing articles of association, you declare who is to form the company and define its management structure. Companies House must receive this documentation alongside a completed IN01 form. At least one company director must be nominated, though a company secretary is not required if the director wishes to perform both roles.

Will You Settle on a Limited Liability Partnership?

Limited Liability Partnerships afford you the flexibility of a partnership though you have mostly the same obligations as a limited company. Managerial responsibilities are shared by each member and you may be able to add new members. A member’s liability is defined by the personal agreements they have made during the process of applying for funding and any individual investments they have made.

Make the right decision with P S Bookkeeping and Accountancy of Colchester

Choosing the right company structure is a difficult decision to make. Make an informed choice by speaking to the company formation specialists at P S Bookkeeping in Colchester. If you are in the planning stages of creating your own company, professional advice could be of great benefit, both in terms of finance and peace of mind.