What to consider when deciding which type of trading entity to use

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Should I be trading as a sole trader, partnership, limited liability partnership (LLP), company limited by shares, company limited by guarantee or a Community Interest Company (CIC)?

There are a series of issues that need to be considered when deciding which type of trading entity to use:

  • What is the expected profit of the business and how will this be taxed?
  • What are the income needs of the individual? How will this be generated and what is the tax cost?
  • Are there any VAT issues?
  • Will the business need outside investment and will the vehicle allow this?
  • Will there be employees and will the structure allow this?
  • Will there be any problems with the legal status of the business; is there any need for limited liability?
  • Are pensions an issue and can the business structure support required pension planning?
  • Will there be losses and how could they be best utilised?
  • Are there any IR35 or status issues?
  • Are there any issues about the individual managing the requirements of the chosen business structure?
  • What are the long term aims of the business in terms of proprietor’s involvement and method of liquidating value?

As with all of our tax tips and web pages this information is necessarily summarised and of a general nature.  If you would like detailed specific advice please contact us.