Each director must also register for self-assessment with HMRC to pay tax on any income they receive from the company.
Directors must also submit annual accounts and a confirmation statement to Companies House each year.
Limited liability partnerships
LLPs combine elements of partnerships and limited companies. There must be at least two partners who share profits and are responsible for the company’s debts.
Each partner is also responsible for paying tax on their share of the profits and must register for self-assessment with HMRC.
LLPs must also submit annual accounts and a confirmation statement to Companies House each year.
Limited partnerships
These are partnerships where at least one partner is liable for the debts of the company and the other partners are not.
The partner with limited liability must register for self-assessment with HMRC and submit annual accounts and a confirmation statement to Companies House.
Which kind of self-employment is right for you?
Choosing the right type of self-employment for you can depend on various factors, such as the level of risk you are willing to take on, the amount of control you want over your business, and the tax implications of each type of business structure.
It is always advisable to seek professional advice before setting up a business to ensure you choose the right structure for your individual circumstances.
The reality of self-employment
Self-employment can be a rewarding and fulfilling way to work, giving you control over your own time and finances. However, it can also come with its challenges, such as irregular income, long hours, and the need to constantly market and promote your business.
It is important to be realistic about the challenges of self-employment and to have a solid business plan in place before starting your own business.
Overall, self-employment can offer a great opportunity for those who are willing to take on the risks and responsibilities that come with running their own business.
Whether you choose to be a sole trader, form a partnership, or set up a limited company, there are options available for all types of self-employed individuals.
With the right planning and support, self-employment can be a successful and fulfilling career choice.
When a company expects to generate more than £85,000 per year (£90,000 from April 1, 2024), it is required to register for VAT. This is an important step to ensure compliance with tax regulations and to manage finances effectively.
Additionally, every year, the company must provide statutory accounts to HMRC that adhere to either UK Generally Accepted Accounting Practice or International Financial Reporting Standards. This is essential for transparency and accountability in financial reporting.
Furthermore, an annual return must be submitted to Companies House, and HMRC must receive a Company Tax Return. These documents are necessary for regulatory purposes and to ensure that the company is fulfilling its tax obligations.
Directors of the company are also required to fill in a self-assessment tax return. If a salary is paid, National Insurance and tax must be paid through the PAYE system. This ensures that all tax liabilities are properly accounted for and paid in a timely manner.
Limited Liability Partnerships
In limited liability partnerships, partners are not personally liable for the debts incurred by the business. Similar to limited companies, their liability is limited to the amount of money invested in the business at the outset.
Limited Partnerships
In limited partnerships, liability for debts is divided into two categories: general partners and limited partners. General partners are liable for all debts incurred by the business, while limited partners are only liable for the amount of money they initially invested in the business.
Setting Up
For more information on setting up a limited partnership company, you can visit the Companies House website. It provides valuable resources and guidance on the process of establishing this type of business structure.
Choosing the Right Legal Status
Choosing the right legal status for your company is crucial for its success. Each structure has its own advantages and disadvantages, so it’s important to weigh them carefully. Some may offer more flexibility and protection, while others may involve more administrative work.
If you are unsure, starting off as a sole trader may be a good option initially. You can always incorporate your business later on as it grows and becomes more established.
The Reality of Self-Employment
According to a report by the London School of Economics in 2022, over 40% of self-employed individuals earn less than £12,000 a year. Self-employment comes with its challenges, including fluctuating income and a high level of responsibility.
However, being self-employed also offers a sense of freedom and independence that can be empowering. Unlike being an employee, you have control over your work and decisions, which can be a rewarding experience.
More on Self-Employment
Becoming self-employed can be a life-changing decision. It may involve financial sacrifices, longer hours, and increased responsibility. However, the freedom and independence that come with it are invaluable. It’s important to weigh the pros and cons carefully before embarking on this journey.