New Business Start ups; Advice on the Structure of a Business

New Business Start ups; Advice on the Structure of a Business

The structure is something that every business owner spends a lot of time initially. One needs to get the structure of the business right as it can dent a severe blow for the business in the future if you get it wrong. Matters relating to the structure range from future business expansion, tax matters to perception of customers and suppliers of your business. In this context it is vital for starting up small and medium scale businesses to focus on getting the structure right.

The three popular business structures that dominate businesses in the UK are explained below.

01. Sole Traders

Sole trader or sole proprietor is when a business is owned and controlled by one person who takes all the decisions, responsibilities and profits from the business they run. Sole trader, also known as a sole proprietor is one of the most popular business types in UK. For starting up businesses, sole trading option gives a lot of freedom and flexibility as it is the owner who takes all the decisions of the business. The profit retention is also high as the labour and other costs are low. Furthermore the owner can decide how much to re invest and how much to take for his personal use. The main drawbacks however are the unlimited liability of the owner, the risk involved and the limited capital investment.

02. Partnerships

Starting up a business as partnerships are becoming less popular by the day, simply because nobody wants to be liable for the mistakes of other partners of the firm. However, partnerships can still be seen among professional service providers such as accountants, lawyers and architects. The main advantages of running a partnership are the significant capital investment of partners, having a range of expertise to manage the business and collective decision making. On the downside of things a partnership could have a lot of disagreements that could even threaten the existence of the partnership. Moreover, unlimited liability of partners makes the involvement of partnerships less attractive.

03. Limited Liability Companies

As the word itself says the liability is limited. i.e. the liability of members (Shareholders) towards the debts of the business is limited up to the amount he / she invested in the company. The other main advantage for a company is that it can issue shares, and it gives them the opportunity to invest more cash on the core business. In the case of private limited companies, the directors are also usually the main shareholders of the company. Thus both the ownership and control of the business remain in their hands. Decisions can be made swiftly and easily, with little fuss, allowing for a more successful business management platform.

On the downside, forming and administering a limited liability company is obviously difficult and costly when compared to sole proprietorships and partnerships. Furthermore, there are more complex and restrictive rules governing the accounts and bookkeeping of limited liability companies.

If you are a individual or a group thinking of starting your own business, we can help you to get into the right track from the initial stages. Through our experience we know that it is the starting up process that consumes a lot of time and money of many small business owners. We can help you by taking this burden away from you. We at KVS accountants will look after all the paper work and registrations with all the regulatory bodies. We have been successful in helping many small and start up businesses in Battersea, Roehampton, Southfields, Earlsfields and Putney Heath. Through this experience we have no doubt that we can help your business too!

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