I. SUMMARY OF OWNERSHIP STRUCTURES SOLE PROPRIETOR COMPANY (Companies Act 2006) PARTNERSHIP (Partnership Act 1890) LLP (LLPA2000,LLPR2001, CA 2006) Liability Unlimited personal liability of individual Limited to amount unpaid on their shares (may require personal guarantee) Partners have unlimited personal liability; joint or joint and several Partnersliability limited and not personally liable over and above their capital share Legal status of business Individual Separate legal personality No separate legal personality Separate legal person Number of persons needed (min) 1 1 2 2 if a business is carried on for over 6 months after the LLP is down to one member, that member becomes jointly and severally liable, with the LLP, for debts incurred after the 6-month grace period – i.e. the benefit of limited liability is lost. Expenses before/during set up Nill i. Admin/legal costsin submitting to Companies House ii. Creation/amendment of AoA and Memo iii. Registration fee iv. Submitting confirmation statements, accounts v. Company stationery Nill, although partnership agreement (deed) advisable and this will have associated costs i. Admin costs in submitting LLIN01 ii. Registration fee iii. Creation of members agreement iv. Pricing LLP stationery - name must appear on all documents like company Publicity/discl osure Register with HMRC for self assessment Companies House: registered office, accounts, members resolutions, capital statements etc. None - register for self assessment individually Companies house: registered office, members detail, accounts etc. Ongoing expenses Minimal Annual accounts, auditing of accounts were not small, confirmation statements Minimal Similar to company Management structure NA In accordance with Act and Articles Directors take day to day decisions as agents of company via board meetings Shareholders = ultimate control as owners- consent required for fundamental changes No fixed structure but should be set out in Agreement ; in its absence though ordinary matters decided by majority ; changes to nature of business requires unanimity No fixed structure but should be set out in Membership Agreement If no, LLPR provisions apply lOMoARcPSD|12263423 BLP Notes Downloaded by Anna Maina (annamurugijoe@gmail.com) Financing methods Personal loans Variety of loans; floating charges;share issuances Personal guarantee will remove benefit of ltd liability Limited to persoanal loans Broader range of options available, incl loans and charges over assets; no share issuance lOMoARcPSD|12263423 BLP Notes Downloaded by Anna Maina (annamurugijoe@gmail.com) TAX CONSIDERATIONS Tradi ng profit s Income tax charged on the individual level, regardless of whether profits kept in the business. Corporation Tax paid on gross profits. Profits can be retained in the business or used to pay directors fees or dividends to shareholders. Dividends paid out of net profits offset National Insurance liability. Income tax charged on the partners’ level, regardless of whether profits kept in business or distributed to the partners. Partners are taxed in accordance with their profit share entitlement Similar treatment to a general partnership. Income tax charged on the partners’ level, regardless of whether profits kept in business or distributed to the partners. Partners are taxed in accordance with their profit share entitlement Capita l gains Tax free personal allowance. No shares so no double charging. Company pays Corporation Tax on sale of a capital asset (chargeable gain). Value of shares will also increase to reflect profit – increase in capital value of sharesis also subject to CGT – double tax. Tax free personal allowance. No shares so no double charging. Tax free personal allowance. No shares so no double charging. No tax free allowance. Inheri tance Tax 50% inheritance tax business property relief. 100% business property relief. 50% inheritance tax business property relief. 50% inheritance tax business property relief. Pensi Contributions Greater tax relief available Contributions deductible from Contributions deductible ons deductible from taxable income up to limit. for company pension scheme contributions. taxable income up to limit. from taxable income up to limit. II. COMPANIES Public vs Private PUBLIC PRIVATE MIN MEMBERSHIP 1 1 MINSHARE CAPITAL GBP50,000 No MINPAID SHARES 25% No PUBLIC TRADING OF SHARES/DEBENTURES? Yes No NAME Public limited company or plc. Limited or ltd. MIN DIRECTORS 2 1 COMPANY SECRETARY Required Discretionary