subject: Different Types Of New Business [print this page] Not every new business needs to go through the formal company registration process. In fact, most small companies never need to arrange company formation unless they actually want to. There are plenty of reasons they might, like the legal protection afforded by limited liability, which can be extremely valuable to insulate company directors from bankruptcy and loss of personal assets in the event of the business failing. Some large contractors might also prefer to deal with limited and VAT registered companies rather than those with more casual arrangements.
Even if a new company chooses not to go through company registration (and is not legally required to do so for any reason), Revenue and Customs do need to be made aware of its creation. The simplest arrangement for many people starting out in business on their own is to become a registered sole trader. These businesses are the primary responsibility of one individual, but they can still contract work out to other people, have a business name, and do many of the things limited companies can do. They cant have employees like larger companies do, but many new businesses start out this way, or as a partnership. Company formation isnt necessary, but new sole traders do need to register as self-employed.
Partnerships are usually formed when a small number of people want to go into business together. Husband and wife teams often follow this route, for example. Again, formal company registration isnt necessary, but new partnerships do need to register for National Insurance contributions and tax payments as soon as they start trading.
Larger start-ups usually become limited companies right from day one. That means registering directors details and the business name with Companies House. Tax liabilities are different to the previous two schemes, and limited companies can have employees and use the PAYE system. Registration can be arranged online quite simply.
