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Business entity options...

Question...

How should your business be structured?

Structure, in this context, relates to the business entity - sole trader or practitioner,

partnership

(either a limited liability partnership (that's an LLP) or a "traditional" partnership (governed by the 1890 Partnership Act) or a limited company) . Although the structure, as discussed her, may have an impact on the organisation, management and administration of the business, in this context it does not relate top those aspects.

The answer...

It depends.

Because it depends upon so many variables, there is no single, simple answer,

For what may seem to be virtually identical businesses, due to differing personal circumstances or objectives of the owner or owners, the optimum structure may be significantly different.

Due to the many combinations of the many, many variables, it is essential to obtain bespoke advice, with a clean sheet and taking full account of all business and personal factors that may influence your decision.

There are huge advantages to be gained by selecting the optimum structure. Conversely, getting it wrong could have a massively adverse impact upon the future results of your business, its management, control, tax and, ultimately, fulfillment of your personal goals and objectives.

If you're in a start up situation, it's now that you should be considering the structure of your business. You are in the ideal place to get it right.

If your business is already established, now is the time to consider its structure and whether it really is the best for you to make the most of your business, your future and, perhaps, the future of your family and heirs.

It's not as simple as considering the projected operating profits and nothing else. There are so many variables, many of which are unique to you or your business, that it is not possible and would serve no purpose to go into detail here. Recurring factors include:

The inclusion of family members;
How assets should be owned, particularly freehold or long leasehold property and by who;
Who is to contribute capital and in what proportions;
Who is to be entitled to capital gains; and
How to retain control.
How to mitigate the tax burden control.

There can be, indeed often is, conflict between the many, many variables. What may be ideal for one factor may have an adverse impact for another. A good example of this is a conflict between profits taxes (income tax or corporation tax) and capital taxes (capita;l gains tax and inheritance tax). What may be the perfect solution for mitigation of profits taxes may have a massively adverse effect on the longer term capital taxes.

To select the business structure requires a full understanding of the effects on all aspects of the business and taxation, which can then be prioritised to determine the ideal structure for you.

Bearing in mind that it's a certainty that there will be changes in both the business climate and your personal aims and objectives, it is essential too that you maintain an adequate degree of flexibility to deal with those changes.

For a thorough and professional review and report on the effects of your current structure and the potential advantages of any change you could make, use the button below to get in touch with us, right now!

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