The UK small profits corporation tax rate, applied up to £300,000, is 20% for the corporation tax year beginning 1 April 2014 and 21% above this (different rates apply to different financial years). You just register your business name and able to start trading. This isn’t an all-conclusive list of business documents you should have available. An LLP is treated as a partnership for capital gains tax and income tax purposes, despite being a body corporate. The other partners register separately (they usually do this after the partnership is registered). Ownership of that legal entity is divided into shares, with each shareholder purchasing shares in the company and, as a result, investing in the company. Administrative and regulatory demands heavier, Annual accounts and financial reports must be placed in public domain, Flexibility: can be incorporated in members' agreement, Advantages of limited company and partnership combined, LLP must start to trade within a year of registration – or be struck off, Business bank accounts are an essential tool for new businesses. Although it is easier to set up a partnership than most other business models, there are still a few legal requirements to be met. You can submit your tax return online or through a paper application. Alternatively, you can register by post - you must do this if you change the model articles or use your own drafted articles. A partnership like this is ‘unlimited', and as such is a very different animal from a limited liability partnership (LLP), which we look at below. Sections. Then, once you've filed the correct documents with Companies House, you are ready to go. It's when the business starts to grow that the problems of being a sole trader emerge. This creates the doctrine of limited liability. This is: Articles of Association: When you register your company you must have articles of association.These are the rules about running the company that shareholders and directors must agree to. Relief is provided from stamp duty on transfers of property to a newly incorporated LLP, to aid the transfer from an unincorporated partnership to an LLP. This is true even if there is no written partnership agreement. Importantly, separate personality means that it is the LLP, and not its members, which will be liable to third parties. Although there is no set format, a solicitor, accountant or formation agent should be contacted to ensure the document satisfies all the requirements, which includes a declaration of compliance and the following information: The incorporation document can be simply a standard partnership agreement modified for the purpose. A partner does not have to be an actual person. These different categories of ownership make up what we call the sectors of the economy. So taxation is a risk, but even greater is the risk of liability. However, deadlines for paper applications are much earlier than that of online applications. Securing Your Business Documents. If you have any doubt, ask a solicitor for advice. Partnerships are a very common extension of the sole trader model, for example when two individuals or a husband and wife work together to build the business. Partnerships are easier to set up than most other business models but partners are personally responsible for the business. This guide covers the main models used in business today: sole trader, partnership, limited liability partnership and a private company limited by shares. You're ready to start your new business, but have you considered how the decisions you make now will affect its growth? Most companies use the model articles but this is not necessary and you may use articles that have been drafted specifically for your company. You will have to register for self-assessment with HMRC and fill in a tax return each year, but the paperwork more or less ends there. For example, a limited company counts as a ‘legal person’ and can also be a partner in a partnership. An attractive option for many who start their own business without huge stashes of cash, or a strong likelihood they'll raise even bigger amounts of finance, the ‘sole trader' badge is often worn by ‘one (wo)man bands' such as professional photographers, independent hairdressers, or those in construction and business-related services. For example, the direction taken by a sole trader is likely to be different from that of a limited liability partnership as they have different tax responsibilities and legal requirements. It has been adopted with enthusiasm by some of the largest accountancy and law practices in the UK. Nonprofit Organization: A type of business that uses its profits for charitable purposes. The nominated partner must keep business records and manage and send the partnership’s tax return. Directors have certain duties which they must abide by which are outlined in the Companies Act 2006. UK Business Structures - a guide to the main models used in UK business today. Even though you are a ‘sole’ trader this does not mean you cannot take on any staff - you can have staff as part of your business but they will not be held responsible for any legal requirements. A private company is one which is incorporated and limited by shares. The business structure determines your legal responsibilities at the start and during the functioning of the business, including: A sole trader is responsible for running his or her business and for meeting the legal requirements that come with it. The great advantage of limited liability is that you can control your exposure to financial risk. By browsing our site you agree to our use of cookies. Nothing in this guide is intended to constitute legal advice and you are strongly advised to seek independent advice on matters that affect you. Meanwhile, the business won't usually continue in the event of the sole trader/owner's retirement or death. Although given the “partnership” label, a Limited Liability Partnership (LLP) is in fact a body corporate. the rules and regulations of employing someone as a sole trader, different rates apply to different financial years, Exclusive owner of the business, entitled to keep all profits but liable for all losses, Between two or more individuals who share management and profits, Private company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested, Some or all partners have limited liabilities, and exhibits elements of partnerships and corporations.