Crafting success: Selecting the right business framework
In order for your business to be both financially secure and successful, you need to ensure you choose the right business framework.
It will not only affect the daily operations of your business, but it will also impact the way in which your business’ finances operate. This includes how you declare your income, how much personal liability you bear, your tax obligations, and the options for you to gain funding.
Which Business Framework Do I Need?
Sole trader
The first type of business structure you could opt for is a sole trader. This means that you would become self-employed as you will be independently running your business.
Becoming a sole trader is straightforward and requires lower initial financial investment. However, it also means that you as the owner assume all financial business liabilities, meaning that your personal finances could be impacted to cover any and all business debts.
A further thing to remember is that all revenue generated by the business is considered your personal income. This means that it would fall under your own personal Income Tax threshold.
Partnership
The next type of business structure you may choose is a partnership. Here, a partnership enables two or more individuals to manage the business, allowing a greater distribution of responsibilities. This can relieve both the financial and managerial pressure.
Being a partner entails means that the accountability for the businesses debts is split across all partners.
Something which should be noted though is that if you opt for a partnership, you need to have a clear agreement at the outset. This should outline financial roles and liabilities and can help prevent potential conflicts amongst partners in the future.
Limited company
The third and final business structure you may decide upon is a limited company. This setup means that the business would operate entirely as a separate entity from is financers.
This setup offers greater protection for your personal assets to be used against business debts, thus having greater security than the other business models discussed.
However, a limited company framework necessitates a more intricate accounting protocol, which includes strict reporting requirements and an adherence to Corporation Tax obligations.
Despite this, though, acquiring a limited company status can greatly improve your image with clientele and financiers, potentially allowing for greater business growth in the future.
Deciding on which business structure is right for you is important, as it can act as the catalyst for seamless accounting and sustained business growth.
A carefully chosen framework can be the cornerstone of a thriving business, as it lays a solid foundation for successful outcomes and future growth, and so is a decision which should not be taken lightly.
If you would like advice on business structures or why you may need to change a business structure and which is the most suitable for you, please contact us today.
