People deciding to start their own business in Great Britain must make a decision as to its form, which is of key importance for their future. Sometimes it is worth considering setting up one of the most popular business structures, such as a private limited liability company (LTD) or a limited liability partnership (LLP), choosing those less common, but better suited to individual needs and possibilities. Below is a list of solutions available to British entrepreneurs.
Self-employed
The simplest form, representing the equivalent of a Polish sole proprietorship. Within its framework, the entrepreneur performs the functions of a director and an employee at the same time, but of course it is possible to hire other people. A person starting a business as a self-employed person is required to register a company with the Inland Revenue, submit annual tax returns and pay income tax and insurance premiums.
In addition, there is a requirement to keep company bills and documents for 5 years, and when your income exceeds £ 60,000 per year, you must account for VAT. A disadvantage of the discussed structure is the fact that it does not have legal personality, and therefore the owner is unfortunately responsible for its obligations with his own property. Self-employment is the right choice for companies providing services, the nature of which does not require extensive technical facilities and premises, and employing a large number of employees. Examples include taking care of children or the elderly, interior finishing and technical work (plumber, electrician, etc.).
LTD (Limited) – Private Limited Liability Company
British company LTD (Limited), is the equivalent of a Polish limited liability company. Unlike self-employment, it has legal personality and its shareholders are only responsible for the amount of the contribution made. British law requires the appointment of at least one company director and at least one secretary. However, there are no minimum capital requirements. However, it is necessary to indicate in the memorandum of association all shareholders and the exact address of the registered office to which correspondence with Inland Revenue and Companies House will be sent.
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The duties of LTD include the preparation and submission of annual tax settlements to the Inland Revenue, as well as the submission of financial statements and annual settlements to the Companies House. Its structure guarantees shareholders a high degree of anonymity, thanks to the right to appoint any person as director or secretary. The company name must end with the abbreviation Ltd or the word Limited. It is difficult to precisely define what kind of business this type of company will be the best for, as it can conduct any legal business activity, both in the UK and around the world.
LLP – (Limited Liability Partnership) – Limited Liability Partnership
A British LLP can be simply defined, as the name suggests, as a combination of a partnership and a limited liability company. Its members are only liable up to the amount of their contribution, or for the amount to which they have voluntarily agreed to be liable. This type of activity has legal personality. Companies House is the registering body of LLP. According to the law, such a company must have at least two members (they can be both natural and legal persons); their upper number is not specified. Contrary to LTD, there is no requirement to appoint a director and a secretary – their duties are performed by members. For registration, it is necessary to indicate the address of the registered office to which correspondence will be sent.
The LLP company must pay CIT, file financial statements, Annual Returns and Tax Returns to the Inland Revenue. If your annual income exceeds £ 61,000 you will still need to account for VAT. The LLP structure will be appropriate for companies that provide accounting or legal services. It is also a good solution for entrepreneurs who, not being residents of Great Britain, want to operate outside its borders (due to the fact that then the partners of the company will not be subject to the British tax obligation).
PLC (Public Limited Company) – Public Limited Company
Referring to the Polish terminology, a PLC type company can be defined as a capital company whose shares may be admitted to public trading. Its registration requires the presence of at least two shareholders and a minimum share capital of GBP 50,000, 25% of which must be paid into the company’s account. This is a requirement to obtain a certificate of commencement of business.
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It is compulsory to appoint a secretary and at least two directors, both of which may be natural or legal persons, and their nationality does not matter. PLC files annual financial reports, Annual Returns and financial reports (to Inland Revenue). The registered office of the company receiving the correspondence must be in Great Britain. Like LTD companies, PLCs can also carry out any lawful business activity in the UK and abroad.
Unlimited Company
Of all the types of companies that can operate in Great Britain, this one is perhaps the most specific. Structure members are fully responsible for its obligations, but do not have to submit annual tax returns (unless the UC is a subsidiary of another type of company (z. O. O.), Or is possibly a holding company – in which case it will be necessary). This type of activity is established primarily to support other companies, or when the risk of failure in a given industry (bankruptcy) is insignificant.
Partnership – ordinary partnership company
This type of structure has no legal personality. It consists of a maximum of 20 partners who are responsible for the company’s obligations with their own assets and collectively make decisions as to how to conduct business. Each of the partners must register here as a self-employed person, pay income tax and insurance premiums. The very establishment of a company does not require registration with Companies House – it is established on the basis of an agreement between partners. This form of enterprise will work especially for people who run a business to a “small extent”, who want to share the costs of their activity and the responsibility of their company.
In practice, the assumption of a partnership structure should be decided by self-employed people who, due to the large number of orders (or their wide scope), are not able to complete all of them. Example: a company providing repair services consisting of several people, each of whom is a specialist in a different field (electrician, bricklayer, painter, plumber, etc.). An additional benefit of running this type of company is the aforementioned division of costs and responsibilities. A good solution is also to write down contracts between individual partners.
Property Management Company – real estate management company
This type of business, as its name suggests, is strictly dedicated to property managers (as well as those investing in this type of market). In addition, it is an effective tax optimization tool for people with the highest threshold, as in its case remuneration may be paid in the form of lower taxed dividends.
Company limited by guarantee – limited liability company
This type of company, registered in Companies House, does not have shareholders, but only members (they can be natural or legal persons). Its liability is covered by sureties. Their value can be as low as £ 1. A company of this type is not owned by its members, nor are its profits passed on to them. The exact value of the guarantee and the objectives of the Companies limited by guarantee operation are specified in the Founding Act and the Articles of Association. Limited liability companies are formed by non-profit organizations (not profit-oriented, but public or private purposes).
Franchise – franchise
Of course, it functions not only in the UK, but it is worth mentioning, as it also allows you to conduct business in the UK. To put it simply, a franchise is a system of selling goods based on cooperation between two entities: the franchisor, who then makes the goods sold, name and trademark available, and the franchisee who undertakes to represent it (on his own account) in accordance with the agreed concept on the basis of the previously concluded the contract. This type of solution is allowed for both natural persons and civil partnerships. It will work in particular for entities willing to conduct commercial activities under the name of a company with an established reputation and an established position on the market.