Buy Limited Companies

So if you are setting up your own business, no matter what it may be, and you’re really excited about the future.

You know your trade and the business seems to be coming in nicely, but how do you control it all at your end from a business point of view? Do you declare yourself “Self Employed”, or do you set up a Ltd Company?

Can you simply pay cheques from an employer into your bank account? Is that even legal? And all the time this is happening you’re getting advice from people left, right and centre who aren’t really qualified to be doing so and have on occasions got their wires crossed!

So let me spell out a few facts and examples for you so we all know where we stand!

The most straight forward and simple way of setting up your new business and a small quantity of formalities is by becoming what we call a “Sole Trader”! The only people you need to inform of this is the Inland Revenue, just tell them that you are self employed and they will pass you the relevant information through their booklets which are easy to swallow. The only reason why you have to declare it to them is because they need to know what is happening with your tax and national insurance issues. You need to contribute to this (as long as you are earning) and the Inland Revenue need to keep track of where you are up to.

So if you decide to set up as a sole trader you are then fully in control of your business and you are responsible for everything that your business incurs. All of the management decisions will be yours. And every single penny of the profits will be yours. You need to keep accurate and legitimate records of all of your incomings and outgoings for your tax and Value added tax too but these records are for your eyes only. They are not for anyone else to look at (or in other words, it’s not compulsory to have them on any kind of public display!)

This may sound great, but the downside is: Any problems are yours too. Which means if your business does not go to plan or fails even, then you are liable for any debts that have mounted up and your property can be seized in order to repay those debts.

This is all assuming of course you are in business on your own as a sole trader. You could always form a partnership if there were two, or even several of you involved. This is in essence totally the same as being a sole trader only you share the responsibilities and profits amongst yourselves. (You also share the debts of this partnership too and again, all partners of your business will be liable should any debts mount up. Sometimes you can make this a bit more formal by drawing up a “Deed of Partnership” as an official document.

This is not a legal requirement in any way but if it is place then it can be amazingly useful to resolve issues or maybe disputes that happen between partners. (This is a regular occurrence in terms of the profit shares!)

This entry was posted on Monday, February 1st, 2010 at 3:05 pm and is filed under setting up a company. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.