What legal considerations do I need to think about when setting up a business? (Part 1)
If you are considering setting up a business there are numerous decisions that you will have to make, including whether you will operate as a sole trader, in partnership with someone else or through a company. With the last two options, you will also need to think about the structure of your business.
To make an informed decision about the type of business vehicle that would work best for you, you need to be aware of the legal responsibilities and obligations that each will impose on you.
In the first of two articles on this subject Louis Mathers corporate and commercial lawyer with Parnalls Solicitors in Launceston explains what you need to think about if considering setting up as a sole trader or in partnership.
The easiest and quickest way to get started is to work as a sole trader. With this option, you will be able to start operating with little formality and with the freedom to make all decisions yourself. Any profits you make will be treated as personal income, so at the end of each tax year you will simply need to complete a self-assessment form as a self-employed person.
The drawback to being a sole trader is that you assume personal liability for all business debts, so you expose yourself to significant personal risk. Depending on the size of your debts and your ability to pay them, you could face the prospect of having a county court judgment made against you and the possible loss of your home or bankruptcy if you cannot pay what you are ordered to.
If you choose to trade with one or more people as a partnership, you will need to formalise your arrangements and will almost certainly want to make most decisions (especially significant ones) jointly. All partners within the business will share liability for the business debts, although someone you owe money to could choose to go after one of you for everything rather than trying to pursue you all. This is because liabilities in a partnership are joint and several.
As well as each partner submitting their own self-assessment return for tax purposes, you will also need to submit a joint partnership tax return to HMRC.
If you are thinking about creating a partnership, it is vital that you take legal advice and ensure you have a well-drafted partnership agreement to cover the arrangement.
Limited liability partnership
A limited liability partnership offers the structure and flexibility of a partnership, but with more protection against potential liability. With this option, you will still need an agreement to govern your relationship with the other partners, and you will also need to submit business as well as personal accounts to HMRC. However, your personal liability for business debts will usually be limited to the total sum that you invested initially.
There are other factors that may influence your decision, such as the need for more finance to get the business off the ground than you can afford, or a desire to offer a broader range of services than you are personally qualified to undertake and where there is not enough money available to employ someone. A solicitor can help you determine what your requirements are and how they can be met, and then advise you on which option they think would be right for you.
If you are thinking about setting up a business, please call Louis Mathers on 01566 772375 or email firstname.lastname@example.org
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.
Not so safe at work - compensation for an accident at work
New organ donation law: giving you control
Running a business from home
Have nude photos of you or your teenager been posted online?
Landowners’ rights and the Electronic Communications Code
Building in your back garden
Christmas is a time for giving (and inheritance planning)
Buying the freehold of your leasehold house
Redeveloping an empty pub for commercial use
Why it takes time to obtain the Grant of Probate
Social Media: The unconscious privacy threat
Is your reputation being threatened?
Making a will after your spouse or partner has died
Interns celebrate completion of internship at solicitors
Selling your home in a flat market, some top tips
Claiming compensation for a serious road traffic accident
New Media and Communications Court list reflects surge in internet defamation claims by Laura Baglow
Has your personal information been shared without your permission?
Planning your escape to the country, what you need to consider – part 2
Government consultation on new national model for shared ownership
Choosing a partnership structure
Planning for what happens when you die by Deborah Adams
Changes to legislation could offer protection for tenants in the private rental sector
Move to the country - Part One
The risks of DIY probate
Will your septic tank still be legal in January?
The death knell for ‘kiss and tell’?
Making a will when you retire
Selling your property at auction
Not looking so good - your guide to compensation for botched non-surgical cosmetic procedures
New threshold of seriousness in defamation proceedings
Legal considerations when building a granny annex
Choosing the right person for your power of attorney
Formal Interviews - Do you need legal representation?
Privacy rights and aerial images
Trustees’ duty to give information to beneficiaries
Five problems with a leasehold property
Taking your first commercial lease
Is your organisation protected from employee social media legal risk?
Have you been targeted by negative social media posts?
Farmers be alert when being inspected
Help for House Sellers?
Don’t let your digital assets end up in a digital grave
Valuing an estate for probate
Development proposals and your local authority search
What can you do if your child is injured in a serious accident
NetRights welcomes new protection for social media users
SHOULD I GET A LAWYER FOR A SPEEDING OFFENCE?
Supreme Court recognises that social media is a “casual medium” in libel battle
Choosing the best conveyancer who is right for you
Making a will after a second or subsequent marriage
Option or promotion agreement – which is best for landowners?
Anonymous pub and restaurant online reviews leave a bad taste
Have you had an accident involving a horse?
Help to Buy – beware of some cracks in the structure
Understanding Lasting Powers of Attorney
Changes to Energy Performance Certificate for Landlords
Had a cycling accident? Your route to obtaining compensation
New year, new home: tips to sell your home in the New Year
Tax Planning for your inheritance
Hearing loss: when your employer may be liable
Buying a home for your retirement, five things you need to consider
Farmers plan to diversify after Brexit
Ministers press ahead with probate fee shake-up - reports BBC News
Botched dental treatment? You may be entitled to compensation
Why a Health and Welfare Power of Attorney is a good idea
Will the new charge on building developments in Cornwall affect you?
Energy Performance Certificates – Do They Matter?
HMRC Challenging Stamp Duty Land Tax Payments
Ben Mitchell qualifies as a solicitor
The potential implications of Brexit on employment law
Appointing a guardian for your children
Houses in multiple occupation – new rules from October 2018
New Agriculture Bill published
Will Brexit affect my pension?
Dreaming of a holiday home? Sort out the legals before putting your feet up
Lasting Power of Attorney by Deborah Adams
Settled status after Brexit by Alexis Hager
How to choose an executor to administer your estate when you die
How overage agreements can boost profits from your land
Top tips for first-time buyers
How Could Brexit Affect My Farm?
Wills & Succession in Spain by Deborah Adams
Brexit – an international and local view by Alexis Hager, Litigation
Capital gains tax - important facts for non-residents of the UK
Buying a home: the importance of making sure the seller is entitled to sell
Changing a will after someone has died: it is possible and it could save you money
Your responsibilities when you have people working in your home
Sad passing of Battle of Britain pilot who served with Parnall family member
Considerations when buying a heritage property
Disciplinary proceedings at work: guide for employers
Employers should have a disciplinary process in place, but just following this may not be enough to avoid falling foul of the law and exposing yourself to the risk of an employment tribunal claim.