For the purpose of this post we are dealing with UK law.
There are a fair few structure types to choose from here but to keep this simple I will stick to the 4 main types
Sole Trader
In the UK if you wish to work as self-employed you must register with the HMRC (His Majesty’s Revenue and Customs) for the purpose of self assessment tax returns.
There are rules around the name you can give your business such as avoiding ‘limited’ or anything that suggests you are an authority or government department.
Obligations with regards to finance are to keep records of invoices both income and expenditure, to send in a tax return annually on time and pay any tax and national insurance due.
Sole traders must also register with relevant bodies and obtain the authority to work in certain industries such as CIS for the construction industry, registration with Corgi for gas or register of consultancy. There are many different requirements on this so its always advisable to know the industry.
Insurance for sole traders isn’t always a requirement unless there are certain circumstances such as hiring someone else in which case employers liability is a must. In certain trades other insurance will be required.
Private Limited Company (Ltd)
As with Sole trading there are rules around what a company names itself but must register with companies House.
Finance is much more complex and accounts must be kept with an auditable track for HMRC to check whenever needed. More tax comes into force here as profits are taxable as well as employee earnings. There are legal requirements around taking money out particularly for shareholders and Directors renumeration and a Ltd company must have it own business bank account.
Certain documents are required such as certificate of corporation, Memorandum of association, shareholder certificates and agreements and insurance must be in place.
At least one Director must be named and there are legal requirements the Directors are personally responsible for.
A registered office address is a requirement even if ‘virtual’
Compliance with all UK business laws such as :
HASWA, Health and Safety at work act 1974
The Equality Act 2010
The companies Act 2006
Partnerships
Although there are variations of this Im using the example of Limited Liability Partnerships.
Similar to Private Limited companies these must be registered with companies house and HMRC but annual tax returns are dealt with differently as they are completed as income for each partner and therefore corporation tax rules don’t apply here. A partnership tax return however must be submitted showing each partners income or rather share of any profit or loss.
The usual UK legislation applies.
Public Limited Company (PLC)
This is similar to a private limited company but with some extra tag ons in terms of requirements.
A public company must have at least 2 directors and unlike a private company there is also a legal requirement to have a company secretary. Accounts are audited whereas this isn’t always the case with Private and they must be available to the public. Overall in addition to a private company a Public Limited Company will be much more highly regulated.
Learners undertaking the Level 3 Diploma in Management will find this post assists with the following criteria:
Unit 304 B&A59 1.4 Describe the legal obligations of a Business