Limited liability can protect the owners from personal liability for a business’ debts
QDo I need to form a company for my startup business?
AYou do not need to trade as a limited company. If you are the sole owner of the business, you can trade as yourself personally using a trading name. If you have business partners, you can trade as a partnership.
The big advantage of a company is limited liability, which can protect the owners from personal liability for the business’ debts. There are a number of factors to consider when deciding:
What are the potential risks for which you might need limited liability?
Are the extra administration costs of a company justified?
Are you looking for investors to whom shares could be issued?
If you have partners would a share structure be better than a partnership agreement?
What is the best structure for tax purposes?
This is a complex area but, for example, do you intend to retain profits for investment, on which you could just pay the lower corporation tax rate as compared to income tax?
If you do decide on a company, it can be easily be incorporated online at Companies House for £12. But you are likely to need legal and accountancy help with the ongoing administration, and if you do have partners it is important to agree the terms between you at the outset. For a company this is usually done in a shareholders’ agreement.
Kidd Rapinet in South Quay can help you decide on the right structure for your startup.
Philip Wild is a partner at Kidd Rapinet Solicitors specialising in company and commercial law