Choosing the Best Legal Structure and Insurance Type for your New Venture
When looking to set up a new business, it can be confusing deciding which legal structure will work best for you; is sole tradership the way forward, or do you need to set up a limited company? Similarly, with insurance; should you be looking into employers’ liability, or getting a public liability insurance quote? These are critical decisions for a new business owner.
Is it necessary to register a company?
Not necessarily. It’s often taken as a given that business owners are required to set up as a limited company, but this isn’t the case for many business owners. The three types of legal structure you can opt for are as follows:
This structure generally provides business owners with the highest degree of legal protection. If the company runs up debts, you won’t be personally liable to pay them. The downside of this legal structure, however, is that the burden of paperwork is significantly heavier. Your profits will be subject to Corporation Tax, and you’ll need to file accounts and pay your tax direct to HMRC.
The business owner is free to make decisions about how they run their business, all your profits are taxed the way you would be taxed if you were an employee, and you don’t have to file documents with Companies House as a sole trader, meaning that the administrative burden is significantly lighter with this option than that of the former. In this case, you’ll need to register as self-employed, complete an annual Self-Assessment tax return (just like company directors), and you will be required to pay your tax contributions directly to HMRC, as well as paying weekly National Insurance contributions.
Partnership or limited liability partnership
If you’re starting a business with one or more people as equals, you might choose a limited liability partnership. Click here for more information on choosing a legal structure.
Do I need any special insurance?
Yes. There are various types of cover for various types of business, so you’ll need to find out which category yours falls into, and in many cases, insurance is a legal requirement.
Employers’ liability, for example, protects against claims for injury or illness endured by an employee due to the work they’ve been doing (and remember that injury can arise many years after being employed by a company), whereas professional indemnity will cover a business when financial loss has been sustained by a client due to incorrect advice or faulty services given by the business or its employees. Public liability insurance, on the other hand, will protect a business against claims from a client or third party for injuries or damage caused to them or their property as a result of malpractice or unsafe premises, for example.
Whatever business venture you’re entering into, it’s going to be exciting – just make sure you’ve looked into all the necessaries before you begin operating as a business, and it should be (fairly!) plain sailing.
Featured article provided by Money Supermarket, the leading comparison site.
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