BUSINESS MODEL & LEGAL STATUS
*** Disclaimer ***
Please note that the information and advice given here does not constitute legal or professional financial advice. The information given here is for guidance only. You should consult a qualified solicitor for legal advice and a financial advisor for financial advice.
Should you be a sole trader set up a limited company or form a partnership?
Setting up as a sole trader is the simplest way to get into business. You are solely responsible for your business, its costs and (the good bit) its profits.
You do not need a separate bank account to your personal account (although this is a good idea).
If you want to operate as a sole trader you simply need to contact HMRC and let them know. You will need to submit an annual self-assessment tax return, informing them of your income and expenditure, which means that you need to keep accurate financial records, including all invoices and receipts.
You also need to pay National Insurance, if your income exceeds a set level.
The downside of being a sole trader is that you are solely responsible for all business costs, including losses. Your personal assets (including your car and your house) can be taken if you fall into debt in your business.
Limited Liability Company (Ltd)
Running a limited company is more complicated than operating as a sole trader.
The advantages of setting up a limited company are that any losses incurred by the company are limited to the assets of the company. So if you were to lose a lot of money in the company, your personal assets (like your house) will not be affected.
Some people view limited companies as more professional than sole traders, and if you are aiming to build a large interior design practice, than an Ltd may be the way to go for you.
To run a limited company, you need to have a 'Memorandum' and 'Articles of Association' drawn up. You can do this yourself online, or pay an accountant, solicitor or agent to do this for you. You need to register with Companies House and file annual accounts.
HM Revenue & Customs (HMRC)
Tel: 0300 200 3200 (Employers' helpline)
Tel: 0300 200 3211 (Helpline for new employers)
Tel: 0300 200 3504 (Helpline for the newly self-employed)
Tel: 0303 123 4500
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