Structuring your business

The myth about business - People have the strangest idea about what is a solid business. It is still true that many, otherwise rational individuals; believe that a limited company has more credibility than an unincorporated business.

Nothing may be further from the truth.

The owners of unincorporated businesses put everything they own on the line every day of the week. That is what unlimited liability means. Conversely the owners of limited companies put their investment in shares in the company on the line. This could be as little as £1 or £2. Any further personal liabilities that they take on are voluntary obligations. They have complete control over the level of personal obligations that they accept.

How solid does your business need to be? If you are running a small consultancy business then the chances are that your customers could not care less what your accounts look like, provided that their work gets done on time. If your business is supplying major companies then they may feel happier dealing with a business, which has a healthy balance sheet.

Forming a limited company is a common route to establishing a new business although it is widely recognised that a large number of company directors have little idea as to their duties and obligations. This may have little practical impact when business is thriving but when things are not going so well, it is critical that you as a company director are fully aware of your duties and obligations. There are a number websites outlining these responsibilities including on the Business Link http://www.businesslink.gov.uk. Reading up on this subject is highly recommended.

The moral here is to establish what your legal position is before it is too late.

There are a number of tactical issues to consider when starting a business and we consider some of these in our tips to structuring your business guide.

If you would like any help in structuring your business then please contact us.