The structure of your business
Starting a new business
You can run a business either as an unincorporated sole trader or partnership, or by using a company.
A company is a separate legal person. You will be a director and employee and also a shareholder in your own company. You can take money out of your company either as salary or by paying dividends.
If you are a sole trader or partnership, your business is not a separate person from you (in England and Wales). As a sole trader, you are taxed as a self-employed person on the profits. As a partner, you are also taxed as a self-employed person but just on your share of the total profits of the partnership.
For more information starting in business, including trading as a sole trader or partnership, see the HMRC website at http://www.hmrc.gov.uk/businesses/tmastarting-up-in-business.shtml
Some of the advantages and disadvantages of these various ways of trading include:
| Risk | Starting up | Ongoing administration | Flexibility | Tax | |
| Sole Trade | Personal liability for business debts | Fairly simple, but Professional help advisable | With care, may be managed on your own. Professional help advisable | Very flexible | Relatively straightforward |
| Partnership | Personal liability for business debts | It is best to have professional help to set up a partnership | You will normally need professional help | Quite flexible | Relatively straightforward |
| Limited Company | Offers some protection from personal liability | Quite complex – you will need professional help | Complex – you will normally need professional help | Less flexible | Complex |
There are other forms of business structure including limited liability partnerships and social enterprises. You can find out more about these on the Business Link website at Business Link: Legal Structures: the basics.
TaxAid helpline
Our helpline offers professional, free, confidential advice to people on low incomes