WHERE LOCAL BUSINESS GROWS

Legal Entities - The Basics

You must choose a structure for your business. This structure will define your legal responsibilities, like the paperwork you must fill in to get started, the taxes you’ll have to manage and pay, how you can personally take the profit your business makes and your personal responsibilities if your business makes a loss. Find out how to choose the right legal structure for your business and how to change it if you find a new structure suits you better.


Sole Trader
 

If you start working for yourself, you’re classed as a self-employed sole trader - even if you’ve not yet told HM Revenue and Customs (HMRC).

As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them.

You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone.

You’re personally responsible for any losses your business makes.

Tax responsibilities

You must:

  • send a Self Assessment tax return every year
  • pay Income Tax on the profits your business makes
  • pay National Insurance

You must also register for VAT if you expect your takings to be more than £83,000 a year.

Limited company
 

A limited company is an organisation that you can set up to run your business - it’s responsible in its own right for everything it does and its finances are separate to your personal finances.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

Ownership

Every limited company has ‘members’ - the people or organisations who own shares in the company.

Directors are responsible for running the company. Directors often own shares, but they don’t have to.

Legal responsibilities

There are many legal responsibilities involved with being a director and running a limited company.

Types of company

Limited by shares

Most limited companies are ‘limited by shares’. This means that the shareholders’ responsibilities for the company’s financial liabilities are limited to the value of shares that they own but haven’t paid for.

Company directors aren’t personally responsible for debts the business can’t pay if it goes wrong, as long as they haven’t broken the law.

Example

A company limited by shares issues 100 shares valued at £1 each when it’s set up. Its 2 shareholders own 50 shares each and have both paid in full for 25 of these.

If the company goes bust, the maximum the shareholders have to pay towards its outstanding bills is £50 - the value of the remaining 25 shares that they’ve each not paid for.

Private company limited by guarantee

Directors or shareholders financially back the organisation up to a specific amount if things go wrong.

Public limited company

The company’s shares are traded publicly on a market, such as the London Stock Exchange. You can also consider setting up a private unlimited company as an alternative legal structure. Directors or shareholders are liable for all debts if things go wrong.

How to set up a limited company

You must register the company with Companies House and let HM Revenue and Customs (HMRC) know when the company starts business activities. Tax responsibilities Every financial year, the company must:

  • put together statutory accounts
  • send Companies House an annual return
  • send HMRC a Company Tax Return
The company must register for VAT if you expect its takings to be more than £83,000 a year.

If you’re a director of a limited company, you must:

  • fill in a Self Assessment tax return every year
  • pay tax and National Insurance through the PAYE system if the company pays you a salary

'Ordinary' business partnership
 

In a business partnership, you and your business partner (or partners) personally share responsibility for your business.

You can share all your business’s profits between the partners. Each partner pays tax on their share of the profits.

Partnerships in Scotland (known as ‘firms’) are different, and have a ‘legal personality’ separate from the individual partners.

Legal responsibilities

You’re personally responsible for your share of:

  • any losses your business makes
  • bills for things you buy for your business, like stock or equipment
You can set up a limited partnership or limited liability partnership if you don’t want to be personally responsible for a business’ losses.

A partner doesn’t have to be an actual person. For example, a limited company counts as a ‘legal person’, and can also be a partner in a partnership.

You must choose a name for your partnership and register it with HM Revenue and Customs (HMRC).

Tax responsibilities

The nominated partner must send a partnership Self Assessment tax return every year.

All the partners must:
  • send a personal Self Assessment tax return every year
  • pay Income Tax on their share of the partnership’s profits
  • pay National Insurance
The partnership will also have to register for VAT if you expect its takings to be more than £83,000 a year.

Limited partnership and limited liability partnership
 

Your liability for business debt differs depending on whether you’re a limited partnership or limited liability partnership (LLP).

You can share all the business’s profits between the partners. Each partner pays tax on their share of the profits.

Limited partnerships

The liability for debts that can’t be paid in a limited partnership is split among partners.

Partners’ responsibilities differ as:

  • ‘general’ partners can be personally liable for all the partnerships’ debts
  • ‘limited’ partners are only liable up to the amount they initially invest in the business
General partners are also responsible for managing the business.

Limited liability partnerships (LLPs)

The partners in an LLP aren’t personally liable for debts the business can’t pay - their liability is limited to the amount of money they invest in the business.

Partners’ responsibilities and share of the profits are set out in an LLP agreement. ‘Designated members’ have extra responsibilities.

Tax for limited liability and limited partnerships

Every year, the partnership must send a partnership Self Assessment tax return to HM Revenue and Customs (HMRC).

All the partners must:
  • send a personal Self Assessment tax return every year
  • pay Income Tax on their share of the partnership’s profits
  • pay National Insurance
You must also register the partnership for VAT if you expect your business’s takings to be more than £83,000 a year.

Unincorporated association
 

An ‘unincorporated association’ is an organisation set up through an agreement between a group of people who come together for a reason other than to make a profit, eg a voluntary group or a sports club.

You don’t need to register an unincorporated association, and it doesn’t cost anything to set one up.

Individual members are personally responsible for any debts and contractual obligations.

If the association does start trading and makes a profit, you’ll need to pay Corporation Tax and file a Company Tax Return in the same way as a limited company.

Change your business structure
 

What you need to do depends on the type of business, if you’re VAT-registered and if you employ people.

Set up the new structure

Follow the normal steps to setting up as a:

  • sole trader
  • business partnership
  • limited company
  • limited partnership
  • limited liability partnership (LLP)
Tell HM Revenue and Customs (HMRC)

If you’re VAT-registered, you must tell HMRC within 30 days of the change or else you’ll face a penalty.

You will need to either:

  • cancel your VAT registration and re-register
  • transfer your existing VAT registration
You can do this online or send a form to HMRC by post. The address is on the form.

If you employ people, you’ll also need to talk to HMRC about the change.

Sell your business

If you’re a self-employed sole trader, in a partnership or own a limited company, there are certain rules you must follow when you sell your business.

Close an existing structure

If you want to close down your existing business structure, follow the usual steps.

To no longer be a sole trader

You’ll need to:

  • tell HMRC you’re no longer going to be self-employed and they’ll cancel your Class 2 National Insurance contributions
  • complete a Self Assessment tax return as usual (you’ll then start to submit tax returns the next year for your new business structure)
To close a business partnership

You’ll need to make sure your nominated partner fills in a tax return when the partnership ends.

If the business partnership will continue without you as a partner, you must still complete a Self Assessment tax return as usual. You’ll then start to submit tax returns the next year for your new business structure.

To close a limited company

You’ll either need to close your limited company or make it dormant.

Changing to a public limited company or an unlimited company

It is possible to change a limited company to a public limited or unlimited company.

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3 results found 
Smith Brothers appoints finance director as revenues soar

Thursday 20 April 2017

Following unprecedented success over the past twelve months, Elland-based high voltage electrical engineering firm Smith Brothers has appointed Richard King as their financial director. With over 30 years’ experience as a financial adviser, and previous directing roles within SMEs, Richard King brings a wealth of accounting and business expertise at an exciting time in the company’s growth. After a year of significant growth in which turnover increased to over £27m, the power contractor has secured a run of new projects. This will see revenue exceed £40m in the next financial year. Commenting on Richard King’s appointment, director John Smith said: “We’ve expanded our operations massively over the past 12 months, so taking on a financial director was the next logical thing to do. “His impressive track record made Richard an obvious choice for the role, and his effective decision-making and vast financial awareness will be pivotal to our continued growth over the coming year.’ With wide-ranging experience in property, manufacturing, the supply chain and public sector, Richard brings versatile financial management, budget strategy and fundraising skills to the position. He commented: “Joining a fast-growing, end-to-end business like Smith Brothers always brings excitement and challenges in equal measure, but I’m looking forward to both. “The company’s expansion over the past 12 months is certainly something to be proud of, and we’re focused on consolidating that growth this year, with our move to bigger premises and recruitment of additional skilled workers. This will set the groundwork for further expansion into 2018.” Taking charge of the firm’s finances, Richard King joins founders John and Richard Smith, as well as David Ogden and Craig Collinson, on the board of directors. Established in 1990, Smith Brothers works on high voltage power engineering projects up to 132kV, providing turnkey electrical and energy management solutions to a widening client base throughout the UK and overseas.
Posted by Scriba PR
HMRC are “Making Tax Digital”. Are you in the know?

Monday 20 March 2017

The government initiative “Making Tax Digital” was first announced in 2015 and will see huge changes to the current tax system, bringing an end to the tax return by 2020 and requiring businesses to manage their tax affairs digitally. To help businesses understand more about the upcoming changes and how it will affect them, Sheards Accountants will be hosting a free event on Thursday 30th March at Huddersfield Rugby Union Football Club. The event will provide an insight into the operational changes that businesses may face once the new system is enforced as well as the benefits that will be gained from switching to digital tax. Steve Reynard, Regional Manager for QuickBooks, will give an overview of Making Tax Digital and its impact on all businesses, together with an introduction to the QuickBooks platform and how it can assist businesses not only comply with the changes, but take control of their finances.   Digital tax will begin to be enforced in April 2018; self-employed individuals and landlords will be the first to move over to the new system, shortly followed by incorporated businesses. Kevin Winterburn, Director of Sheards Accountancy commented: “We understand that the upcoming changes to the current tax system may seem daunting and that there may be an increased reporting burden, given that financial information will need to be submitted to HMRC on a more regular basis than is currently required. " “But all businesses should have up to date information on their finances in order to make informed business decisions. Making Tax Digital is an opportunity for businesses to get control of their finances, to simplify and modernise their systems and give them valuable information, at the right time.” “Our message to business owners is a simple one. There are fantastic accounting tools now available that can help you improve your business. Look at making them a part of your business as soon as possible, don’t wait for HMRC to enforce it!” The event will take place from 11:30am – 2:00pm and will include a light lunch and an opportunity to network with other guests.
Posted by KC Communications
Sheards Accountancy announce charity partnership with Kirkwood Hospice

Monday 20 February 2017

Leading Huddersfield accountants, Sheards Accountancy, have announced that their charity partnership for 2017 will be with Kirkwood Hospice. The partnership will see Sheards undertake a variety of fundraising activity throughout the year with a target of raising £4,000 which will go towards a piece of vital equipment for the in-patient unit from the Hospice’s Birthday Wish List. Kirkwood Hospice, who are celebrating their 30th anniversary this year, provide free of charge, specialist care to adults across Kirklees who suffer from advanced or progressive illnesses. Sheards will host a number of fundraising events which will include their ever-popular, annual curry night which will be taking place in Spring and has historically seen over 100 local business professionals attend. Kevin Winterburn, Director of Sheards Accountancy commented: “Kirkwood Hospice have been such a huge part of the community for 30 years and have helped so many. We are really looking forward to working towards our fundraising total to support the fantastic work that Kirkwood Hospice do." Kate Leadbeater, Partnership Development Manager of Kirkwood Hospice commented: “Our new charity partnership with Sheards is one that we really value and we can’t thank them enough for choosing Kirkwood Hospice. Sheards have fantastic links to the business community and have some great events planned to promote our work to other local businesses while raising money to support our charity. We really appreciate Sheards’ support and look forward to working with them this year.”
Posted by KC Communications
3 results found 

Events Posted

3 results found 
Image for
Sheards Charity Curry Night
Monday 15 May 2017, 18:00 - 21:00
70, John William Street, Huddersfield, HD1 1EH
£20 - 50 places
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Introduction to Xero Cloud Accounting
Thursday 18 May 2017, 10:00 - 12:00
Abacus House, Pennine Business Park, Longbow Close, Huddersfield, HD2 1GQ
20 Credits - 15 places remaining
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Introduction to Xero Cloud Accounting
Thursday 8 June 2017, 10:00 - 12:00
Abacus House, Pennine Business Park, Longbow Close, Huddersfield, HD2 1GQ
20 Credits - 15 places remaining
3 results found 
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