The structure you choose affects your tax, your legal risk and how much admin you carry. It is worth thinking about before you start trading.
The four common options
Sole trader: The simplest to run. You and the business are the same legal person, so you are personally responsible for its debts.
Partnership: Two or more people or entities carry on business together and share the income. Each partner is generally responsible for the debts of the partnership.
Company: A separate legal entity. It has its own tax rate and reporting obligations, and costs more to set up and maintain.
Trust: A trustee runs the business for the benefit of beneficiaries. It can be flexible, but the rules are technical and the set-up needs care.
Questions to ask
How much risk does the business carry?
Will you bring in partners or investors?
Do you plan to reinvest profits or draw them out?
How much admin are you willing to take on?
Do you plan to sell the business one day?
There is no best structure, only the one that suits your situation now and where you expect to be in a few years. Changing later is possible, but it can trigger tax and legal consequences, so it pays to plan.
A short conversation before you set up can save a lot of cost later. Get in touch and we will talk through the options for your business.
General information only. Consider professional advice for your circumstances.