Businesses can have many different structures such as:-
- Sole Trader.
- Limited Liability Company.
Sole Trader – is what it says, a business without any other partners / owners.
Advantages of being a sole trader include:
- Your business and tax obligations are probably going to be less complicated.
- You can still hire staff and enter into contracts.
However, there is sole responsibility for the businesses debts.
Partnership – there is more than one owner. A partner can be an equal partner or a partnership can be formally divided any way you agree, for example 60% – 40%.
If a partnership business fails however, any of the businesses debts fall on all partners, so if one partner for example dies, you will be responsible for that partner’s share of the partnership’s debts.
A partnership agreement needs to meet certain legal requirements. This is where developing a strong relationship with your solicitor will make sure your partnership agreement covers what it needs to and protect your rights in the partnership.
Before you make a decision, you should seek the advice of a good accountant and a good solicitor so you are protected and you can concentrate on the business itself.
In nearly every article I write I am drawn to a familiar theme. It is so important to develop a strong working relationship with your family solicitor.
Next week in part 2, we cover Limited Liability companies and how your solicitor can help.