The majority of ICB members are Sole Traders. This is the simplest way to start working. You are running the business by yourself, but you get to keep all of the profits after tax.
You can still have employees, being a sole trader just means that you have sole responsibility for the business. This also means you are solely liable if anything goes wrong.
A Partnership would be established when two or more members wish to start a business together. Each member is then equally responsible for the company. It is imperative that the partners sign a written contract between themselves before trading starts. This will make it easier if one partner decides to retire or leave the partnership. It is important to remember that partners are jointly and severally responsible for any problems that arise, including tax.
Limited Companies are an entity in their own right and the finances of the company are separate from the owners.
You can set your business up as a private limited company and appoint yourself, or other persons, to run the company as a 'Director'. You must register (or ‘incorporate’) the company with Companies House.
Once the company is registered you’ll receive a ‘Certificate of Incorporation,’ to confirm the company legally exists, with the company number and date of formation.
Sole traders are personally responsible for their business debts, but the liability in a Limited Company is usually limited to the shareholders. The liability depends on the type of company being created.
A private company limited by shares means the shareholders' liability is limited to the original value of the shares issued but not paid for. A private company limited by guarantee means the company members financially back the company up to a specific amount if things go wrong.
If you are unsure which business set up would be best for you, it is a good idea to seek advice from an accountant or call the ICB legal support helpline on 0845 060 2345.
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