Business Structures
First of all we congratulate you to decision to be your own boss, this is very crucial moment for you to decide the best structure for your company. The most suitable structure for you will depend on your personal situation and future plans.
The possible options you have are as follows.
Sole trader
If for one person only, (i.e. yourself) it could be, you should decide to become a “Sole Trader”. This is the simplest way of trading. There are only a few formalities to trading this way, the most important of which is informing HMRC within 3months from day you start trading. You are required to keep business records in order to calculate profits each year, and they will form the basis of how you pay your tax, and national insurance. Any profits generated in this manner are automatically yours. The business of a sole trader is not separated from the proprietor’s (that is your own) personal affairs so that if there are any debts, and or liabilities, you are legally liable to pay those debts down to your last worldly possession.
Partnership
If two or more people come together and decided to trade. They can trade under a partnership basis.
A partnership is an extension of being a sole trader. The partners will agree to share the joint profits, and all the costs, in pre-determined percentages. It is advisable to draw up a Partnership Agreement which sets the rules of how the partners will work together. Partners are taxed in the same way as sole traders, but only on their own share of the partnership profits. As with sole traders, the partners are legally liable to pay the debts of the business. Each partner is ‘jointly and severally’ liable for the partnership debts, so that if certain partners are unable to pay their share of the partnership debts then those debts can fall on the other partners.
Limited company
If you have decided to form a limited company. First of all you have to decide how many Directors, who is going to be Company Secretary and how many share holders. Minimum requirement to form a limited company is one Director, and one Company Secretary. A limited company is a separate legal entity from its owners. It can trade, own assets, and incur liabilities in its own right. Your ownership of the company is recognised by owning shares in that company. If you also work for the company, you are both the owner (shareholder) and an employee of that company. When a company generates profits, they are the company’s property. Should you wish to extract money from the company, you must either pay a dividend to the shareholders, or a salary as an employee. The advantage to you is that you can have a balance of these two to minimise your overall tax and national insurance liability. Companies themselves pay corporation tax on their profits after paying your salary, but before any dividend distribution. Effective tax planning requires profits, salary, and dividends to be considered together. A big advantage of owning a limited company is that your personal liability is limited to the nominal share capital you have invested.
Soon after your company has been formed at Companies House, HMRC will issue a form “CT41G”. By completing this form HMRC will register your company for Corporation Tax; this is charged at 20% for the year 2011-12 payable on the company profit. The rate of Corporation tax normally changes each year, and is fixed in the budget presented to Parliament by the Chancellor of the Exchequer.
Bank Accounts
One of the first actions required after deciding and registration is to open company bank accounts.
PAYE/NIC
If you intend to pay or be paid a salary, then you will need to set up a PAYE (Pay As You Earn) scheme with HMRC.
VAT
You must register for VAT if the annual turnover of the company will exceed £73,000 (2011/12). You can register for VAT before you reach this figure, if you do not collect VAT it makes your Company look very small.
Insurance
Generally there are three types of insurance that you need to consider.

• Employer Liability Insurance
• Public Liability Insurance
• Professional Indemnity Insurance