Structuring a business

Starting a new business can be a daunting prospect and a new business with ambition needs good advice from the start. Knowing the specialist side of the business is no guarantee of success if it is not properly structured and complies with all the regulations. This applies to finance and tax as much as to other areas. 

We can advise on the best financial structure in order to suit your personal requirements and aspirations.  Getting the structure right from the start is also important because at this point the business will have considerably less value than compared to when it has been established for a number of years. If therefore, it later needs restructuring, say for a sale, it could mean unnecessary, additional tax liabilities.

We can also advise on compliance with legislation. Missing tax compliance deadlines and filing deadlines at Companies House can result in penalties and can create additional work in putting matters right when you should be concentrating on your business.  We will guide you through the technical maze and provide support you need.

We advise on business structures, incentives and the tax implications together with the accounting and tax support needed, including the annual compliance.

Sole Trader

The most straightforward way to conduct your business is as a Sole Trader. This may be suitable if you are not concerned about the risk of litigation and will be withdrawing the full profits from the business as they arise. The total profits will be liable to income tax, even if not withdrawn from the business.

Partnerships / Limited Liability Partnerships (LLP)

There are many reasons why a partnership may be the best trading vehicle to conduct your business.  Working with a partner may bring in new clients, equity capital and skill sets to complement your own.  Partnerships can also offer a greater degree of flexibility than companies.  The tax position is similar to that of a sole trader as each partner is taxed on their full share of the profits, even if these are not withdrawn from the business.

If it is preferred to conduct the partnership business in an entity which can provide limited liability, a LLP can be used. A LLP is a corporate body that is normally tax transparent and so taxed in the same way as a normal partnership. 

Partnerships must file tax returns and Cameron Cunningham is able to prepare these and the accounts which are required for this purpose, and also to measure the profitability of the business.  LLPs are required to file annual statutory accounts at Companies House.

Limited Company

Using a limited company as the trading entity can be advantageous if it is intended to reinvest part of the profits in the business. The rate of corporation tax (21% for the 2014 financial year, reducing to 20% in 2015), is less than income tax at the 40% higher and 45% additional rates and so profits retained in the business suffer lower levels of taxation.

Profits distributed by way of dividend, salary or other payments will likely suffer income tax and possibly national insurance contributions in the hands of the recipient. However it is likely that this will still be a lower effective tax rate overall compared to being taxed on the profits personally.

A limited company will provide a greater degree of protection to shareholders as they are only liable for the debts of the company to the extent of their share capital. Different classes of shares can be issued to suit individual and corporate investors

At Cameron Cunningham we deliver a tailored service to each individual company.  We are able to provide dedicated support and provide advice on the annual compliance issues. More importantly, we work with our clients to mitigate the overall tax burden for the company and the stakeholders.

Hybrid Structures

Occasionally it may be beneficial to use a hybrid structure which may involve structuring a business to utilise the benefits offered by both a corporate and a partnership. This is less likely following the changes taking effect from 6 April 2014 and we can advise appropiately