Start Up

Structure of your Start Up Business

Different rules come into play depending on whether you are employed or self-employed, a sole trader, partnership, company or franchise:

Sole Trader Start-Up

If you are a sole trader then you are typically a self-employed person who submits an annual set of accounts to the Inland Revenue. You also pay National Insurance, although there are some exceptions.

You do not need to register your business name. If you use a business name other than your own personal name, your stationery must also have your own name and so must your premises. You are personally liable for all debts incurred by the business.

Partnership Start-Up

A partnership is very similar to a sole trader except there are two or more people involved.  The big difference is that all the partners are "jointly and severally liable" for all the debts.  This means that if, for example, your partner disappears, you are liable for all, not half, the debts.  No matter how friendly you are, things may go wrong.  It is often wiser to agree things at the beginning to avoid a bitter dispute later on.

This is why, if you decide to form a partnership, it is important to get advice from a solicitor. They can draw you up a formal partnership agreement - called a ‘deed of partnership’.  It will cover ownership of the business assets, how you will share the profits, liabilities, leases and other responsibilities.  It is important to get these sorted out at the start.  If you do not they can cause major headaches later on.  LaiPeters & Co can guide you through the process and ensure you satisfy all of the partnership regulations.

Franchise Start-Up

It is true that franchising can be a relatively quick way to set up in business. If you are interested in selling a well-known brand or product, are prepared to work hard and have the right amount of money to invest (both for the initial cost and ongoing costs), you can be very successful. However, you must really do your homework when it comes to taking on a franchise because you will be tying yourself into a commercial contract for a definite period of time.

You must be sure to test out the viability of the franchised product or service in the area you intend to work. This means doing some in-depth research to ensure there is a market for the product or service and that there is not too much local competition.  And, you must be sure that you will be suited to this type of work.

To run a franchise, you must make a contract with the franchiser. Operating a franchise can be very complicated, so it is essential that you seek legal advice.

Limited Company Start-Up

To form a limited company, you can buy an ‘off-the-shelf’ company or create your own new company. You can buy an off-the-shelf company through a company registration agent.  If you create a new company, you must agree and register its name and address with the Registrar of Companies at Companies House.  However, this is not necessary if purchasing an off-the-shelf company.

A limited company is a separate legal entity, which is distinct from you as an individual, even if you are a director. (See pros and cons...) A company will normally have at least two shareholders and a minimum of two 'officers'  - a director and a company secretary.  Limited companies can offer some protection to the owners in that their liability to meet the company's debts is limited to the amount of their shares. However, you could lose this protection as it is normal practice now for banks to look for personal guarantees from you if the company needs to borrow.

There are a number of legal requirements tied to a limited company. For example, if your business is a company, you must keep records for at least six years from the end of the tax year they relate to.  A limited company must display its full corporate name outside all places of business and on stationery. Registration details must be shown on business letters and order forms.  The Director must also make an annual return to Companies House and send in annual accounts.