Before starting a company whose main purpose is going to be trading, you need to determine the structure that business will have. There are several legal considerations with each of these structures, with their respective advantages and downsides, from decision making roles, the way taxes are handled, recordkeeping and liability. The simplest form is the sole trader, requiring minimum documentation. The main disadvantage is the liability, which is unlimited. This issue can be avoided by creating a limited company.
- If you want to become a sole trader, this is the easiest way to do it as their is less paperwork.
- The disadvantages to this is you will be solely responsible for any debts that occur.
- You can also set up a limited company, which also comes with its own set of advantages.
“Before you start trading, you will need to decide what kind of legal structure you want your business to have. This will determine who makes the management decisions, how much tax you’ll pay, what records you need to keep, who has financial liability for the business and how you raise money.”