Start­ing up

Lim­ited li­a­bil­ity can pro­tect the own­ers from per­sonal li­a­bil­ity for a busi­ness’ debts

The Wharf - - Technology - By Si­mon Robe­son

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

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