An accountant is often mistaken for someone who completes your tax return and prepares accounts. Although they do fulfil these duties, a reputable accountant can do far more for your business than your annual return. Outsourcing finance and accounting will leave you free to concentrate on other aspects of the company, knowing that everything is running as it should. Organisation of the business structure is just one way in which an accountant can help.
Sole trader
Setting up your business as a sole trader is a relatively simple process with minimal administration. Generally speaking, you will inform HMRC of your self-employment, keep business records and every year complete and submit a self-assessment tax return. All your profits are yours to keep, but so are the debts incurred by the business. If you have financial difficulty as a sole trader, you may find that you are liable for them, which could affect your personal assets.
Partnership
If you set up as a partnership, you will need to complete a tax return for the business and your own personal self-assessment tax return. A partnership involves slightly more administration. You will have a partner to work with, but you may find that you have problems agreeing on key decisions and other matters. You agree prior to setting up the business how profits will be split and who will be the main partner, as they will be responsible for the paperwork. If there are any problems with finances, all partners will be responsible, which could affect personal finances.
Limited company
A limited company involves a little more administration, but has a number of benefits. You may find that you are financially better off, especially if your profits exceed the higher rate threshold. As the company is a separate entity, all debts are the responsibility of the company and your personal assets aren’t at risk.
For more details about your business structure, give us a call soon.