As the economy improves, this could be the perfect year to start your own comapny. Read part one of our guide on how to make your dream business come true.

Legal structure

Choose the legal structure of your business carefully, as each one has different tax and legal obligations. Read our list below for an overview of your options. For the majority of structures, the first thing you will need to do is register as self-employed with HMRC . This applies to being a sole trader, a partner, or as a member of a limited liability partnership as an individual rather than a company. If you want to set up a limited liability company you will need to register with companies house.

Sole trader

This is the most popular business structure for SMEs, with around two-thirds registered as sole traders. Being a sole trader is the simplest way to run a business: it does not involve paying any registration fees and keeping records and accounts are straightforward. You also get to keep all the profits. However, you are personally liable for any debts that your business runs up, which make this a risky option for businesses that need a lot of investment.

For more information read our guide: How to succeed as a sole trader.

Limited liability companies

Limited companies exist in their own right. This means the company's finances are separate from the personal finances of their owners.

Shareholders may be individuals or other companies. They are not responsible for the company's debts unless they have given guarantees (of a bank loan, for example). However, they may lose the money they have invested in the company if it fails.

Partnership

In a partnership, two or more people share the risks, costs and responsibilities of being in business. Each partner is self-employed and takes a share of the profits. Usually, each partner shares in the decision-making and is personally responsible for any debts that the business runs up.

Unlike a limited company, a partnership has no legal existence distinct from the partners themselves. If one of the partners resigns, dies or goes bankrupt, the partnership must be dissolved - although the business can still continue.
A partnership is a relatively simple and flexible way for two or more people to own and run a business together. However, partners do not enjoy any protection if the business fails.

Limited liability partnership (LLP)

An LLP is similar to an ordinary partnership, in that a number of individuals or limited companies share in the risks, costs, responsibilities and profits of the business. The LLP structure incorporates
The difference is that liability is limited to the amount of money they have invested in the business and to any personal guarantees they have given to raise finance. This means that members have some protection if the business runs into trouble.

Franchise

Buying a franchise is a way of taking advantage of the success of an established business. As the ...

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