If you are thinking of starting a new business, or if you are just about to take the plunge, you will know that there is a lot that you have to do. Here are a few things to think about and do, before you dive straight into running your new business.
One of the first things to consider is what type of legal entity you intend to use. Often people just start and don’t consider what business structure they need until later on. If you have any doubts I recommend you talk it through with your accountant or solicitor.
The basic types of business are a sole trader, a partnership, a limited company or a limited liability partnership. Whilst in some cases the structure can be changed relatively easily, it makes sense to give it some thought before you start. You should also think about your exit plans at this stage, as this may affect your choice of trading structure.
A sole trader is just that. You set up in business on your own. The business is no more than an extension of you in many ways, certainly as far as your finances go. This by far the easiest option for a lot of people, as there is less administration, but it can also be lonely. If you set up on your own look for ways to meet up with other business owners on a regular basis.
A partnership is two or more people working together, your liabilities are similar to those of a sole trader, though bear in mind that usually all partners are responsible for the actions of the others.
If you set up in partnership you should have some kind of agreement defining what the shares are and who gets what in the way of drawings and distributions. This will also cover what happens in the event of a major disagreement, or if one partner leaves for any reason.
Trading as a limited company can have many benefits, in particular it means that the business is a separate entity from you. This means that your liability is limited to the amount of share capital you have in the business. There may also be tax savings depending on your circumstances, but you should never make your decision based solely on tax implications.
There are more costs involved and often more red tape than with a sole trader or partnership. A company has to file various forms as well as its accounts with Companies House, and there is a cost involved in doing this, as well as in preparing the information.
A limited liability partnership is like a cross between a partnership and a limited company. It has a set up like a partnership, but the limited liability of a company. It must file records with Companies House in a similar way that a Limited Company would.
There are many areas to consider when deciding what trading structure is best for you. These include among others, the tax implications, your own financial situation – pensions, mortgage etc, whether you need a vehicle, what type of business you are setting up, whether there is a property involved, or a requirement for a property, how many people are setting up the business and what relationships are required.
The best thing to do is talk it over with your advisors and make an informed decision. What you are aiming to do is find a balance between the various issues that works for you.
If you start as a sole trader or partnership, you can always change into a limited company later on.
The most important accounting element when running a mine is that of Tax
You need to make sure that your business complies with the (extensive) tax and information filing requirements imposed on you. If you don’t you will almost certainly incur problems, and financial penalties. Look for affordable accounting and auditing companies near your for professional assistance.