When setting up your business or non-profit organisation, you have a number of options for the way you can structure it. There are several types of legal status that affect issues such as how your venture operates, how it is recognised by law, what the tax implications are, and what will happen to any future business debts. Each structure will define your legal responsibilities, for example, the paperwork involved, taxes you’ll need to pay and how you can personally take the profit your business makes.
So when you choose a business structure there are different entities to choose from.
• Sole Trader
• Partnership, including Limited Liability Partnership (LLP)
• Private Limited Company
• Public Limited Company – (PLC)
• Community Interest Companies (CICs)
• Charitable Incorporated Organisations – (CIO)
• Right to Manage Companies – (RTM) – mainly for landlords
As a first port of call, check the Business Wales website for up-to-date information for further information, advice and suitability for your own venture.
The Small Business site offers guidance and cast studies from a wide range of companies, whether you are trying to decide to start as a sole-trader, or as a bigger entity.
The Centre for Business in Wales offers advice for all start-ups, including legal structure.
Companies House – Guides
CH provides a range of advice and tools for limited companies, including the ability to register online and help with choosing a business name, guidance on filing your accounts and a document submission checklist.
HM Revenue & Customs (HMRC) – Guides
The HMRC offers downloadable guides, leaflets and forms aimed at people starting up in business for the first time. The documents are designed to give a summary of the tax and legal implications of being a sole trader or a member of a partnership.
The CIC Regulator
A range of practical explanatory information about Community Interest Companies, covering how they operate, which types of businesses are suited to this format, and how to set up a CIC.
In all cases, you should seek to find an accountant who can prepare and manage your accounts and/or prepare VAT returns and Companies House returns where applicable. Some legal structures will require you to have payslips and payroll software. HMRC will send a starter pack if you are interested in looking into how this will work for you. In all cases, ensure you do receive advice, as you may become personally liable for debts incurred.
Also consider taking out relevant insurances, e.g. for professional indemnity insurance (PII) covering civil claims against your firm, most commonly for professional negligence. Also if you are setting up a company, and will have employees, employers’ liability insurance policy must be in place. If you employ people, you’re automatically legally obliged to take out this cover. It will help you if an employee is injured, or becomes seriously ill through working for you.
We’ll update this if any new formations arise, and hope that the advice helps you to make the right decision!