There’s a lot of enthusiasm when you’re starting a new business, but it also comes with a lot of concerns. There will be a flood of issues to address; one of these will most likely be how you can set up a new business. The structure you pick will significantly impact how your business works. It can govern the taxation, level of personal responsibility, the level of administrative work, and even how much money you can raise.
Are you planning to start a new business in the United Kingdom but wonder how you can set it up? Such questions knock on the door of every aspiring business person or entrepreneur as the way you set up your business plays a crucial role in the future of the venture. Read on to know about the various methods of setting up your business for maximum growth potential.
What are different ways to set up a new business in the UK?
In the United Kingdom, there are numerous ways to start a new venture, but you’ll need to opt for the one that best matches the framework of your organization. Starting with the improper setup might lead to many issues, later on requiring considerable counsel to resolve, which can be expensive. So here are a few effective ways by which you can start your new business in the UK that will give a proper definition and position to your company:
1. Private and public companies:
Private and public limited are the two kinds of limited liability firms. A public corporation is one whose stocks are registered freely and are established on a public stock exchange. A private corporation is one whose stocks are owned exclusively by its members and are not listed on a stock market.
Limited liability implies that the company, not its owners or management, enters into contracts, hires employees, pays bills and revenues, and is prosecuted if criminal offenses are committed. Unless chosen by the Board of Directors, the proprietor of a limited company isn’t necessarily engaged in the firm’s day-to-day operations.
2. Sole proprietorship:
A single person owns and manages this sort of business. There is no legal difference between the proprietor and the firm, which means you are personally liable for all liabilities and after-tax earnings. This is known as ‘unlimited responsibility.’
Sole trader firms are simple to start and stop, subject to minimal laws, allow the owner to make their own choices, and often have modest operating expenses. The owner is in charge of maintaining day-to-day financial records, while they can hire a professional accountant to take charge of the year-end accounts, which are used for filing self-assessment tax.
On the negative side, single trader enterprises may be challenging to sustain, and owners often have to work long hours. In addition, there’s no other person to share the responsibility with, so the onus of every action falls on the owner.
Partnerships are similar to sole proprietors in that they are susceptible to unlimited liability. Still, they vary in that they include two or more persons combining their experience to manage and control the firm jointly. A partnership deed or agreement specifies typically how much money each partner has invested, how income and expenses are split, and who will be in charge of accounting. On their respective profits, each partner pays income tax and National Insurance.
Partnerships often provide benefits such as shared responsibility, decreased time pressure for each person, and enhanced financial clout and specialization. Making choices, on the other hand, might be challenging. Furthermore, one partner may believe that the other is not putting out adequate effort or is profiting disproportionately, leading to disagreements.
This method encompasses a well-known firm owned by a brand but operated by a franchisee, such as McDonald’s, KFC, or Hertz. The franchisor can offer the franchisee the right to utilize their revenue model in exchange for a monthly fee. Workloads and startup expenses are often cheaper, company financing is more readily obtained, and partnerships with suppliers, dealers, and marketers are already in place.
On the other hand, high recurring costs limit franchisees’ long-term profitability. The franchisor instead should opt for alternative operating techniques to maximize the profit and make the business run smoothly.
2. Social enterprise
This business is run to help humanity or the ecosystem, and revenues must be publicly reinvested to meet its goals. As shown in a recent government estimate, about 471,000 social entrepreneurs in the UK employ about 1.44 million in population and provide £60 billion. Cooperatives, community banks, economic trusts, employee-owned firms, and social housing are examples of social enterprises.
Setting up a new business the right way is imperative for its success. It not only gives a structure to the company but also defines its goals and objectives. Keep in mind these ways while setting up a new business in the UK. It will help you find the most suitable method of starting your new venture.