One of the questions we are most frequently asked by both current and especially by new clients relates to the most appropriate structure for their business. It’s rarely a topic that has a clear answer as there are advantages and disadvantages to a corporate structure and indeed, other alternatives. In this article we have discussed the most recognised ways to run a business and some of the advantages and disadvantages of the different structures, we begin with sole trader businesses.
Sole trader:
A sole trader is the simplest form of business structure available if you want to be self-employed. It’s an individual trading under their own name or a business name, and they are personally liable for all the business risks. At lower levels of activity, being a sole trader is a perfectly acceptable form in which to trade.
Advantages:
- Simple to set up.
- Low maintenance costs – no formal filing requirements apart from a tax return.
Disadvantages:
- If your business becomes insolvent, creditors will be able to access your personal assets (including your home) to obtain payment of their debts.
- In the same way, personal assets can be put at risk if third party claims cannot be met by insurance or business funds.
- At higher levels of profitability, it will in most cases pay to incorporate your business to save tax.
If you are a new start up and need help with your tax returns, please contact us at MJB Avanti (08000) 388 799