Choosing the right business structure for your operations in the UK is an important decision that can have a significant impact on your success. In this guide, we will be providing information on the most common business structures used in the UK – Sole Trade, Limited Company, and Umbrella Company.
Read on to find out which business structure is the right one for you.
Sole trade refers to a single-person business in the UK, with an individual being solely responsible for the actions of their business. Sole traders do not have to register as a limited company and are not subject to corporation tax, but they do have to pay income tax. The profits of sole traders are also subject to self-assessment tax returns.
A limited company is a separate legal entity from its owners and shareholders. As such, limited companies are subject to corporation tax, which is at a different rate from income tax. Unlike sole traders, profits made by limited companies are not taxed directly, but instead, the money that is left after paying corporation tax is then divided amongst shareholders.
An Umbrella Company is an organisation that provides a legal structure for self-employed contractors, allowing them to work as employees of the umbrella company and receive payment on their behalf. The umbrella company will then take care of all tax and national insurance contributions, paying these directly to HMRC after deducting a fee from the contractor’s pay.
Choosing the right business structure for your needs can be a difficult decision, as each one has its own pros and cons. It is best to speak with an accountant or financial advisor to ensure you are making the right choice for your business.