A Quick Guide to the Different Types of Companies

I get asked a lot of questions about what type of company people should set their business up as. There is no right or wrong answer to this question as it is down to a personal preference. However, I have outlined below some of the main points about some of the most common types of businesses.

Sole Trader (Self-Employed): The description is in the name – you run the business on your own and the profit is your income. A sole trader you are required to register with HMRC as a business, file a self-assessment at the end of every tax year, pay tax on all of the profits and you are responsible for your own NI. You can still have staff (employees). You alone are responsible for any debt the business has. Apart from trademarking your business name, there really isn’t anything protecting the name you’ve chosen.

Limited Company: A limited company is owned by those who hold shares in it. Everything is separate from your personal finances and the company is responsible for its own debts. All profit that is made belongs to the company, and it must file a corporation tax return at the end of the financial year. The name of the company is protected as you must register with Companies House. Each company must submit statutory accounts and an annual return to Companies House. Directors must submit a self-assessment to HMRC at the end of every financial year.

There are subtypes of limited companies:

Limited by Shares: Most common type and means that a shareholder is only responsible financially for the value of shares they own but haven’t paid for.

Private Company Limited by Guarantee: The company has the financial backing of a director or shareholder up to a specified amount.

Public Limited Company: The shares are traded publically.

Partnerships: All partners of the business share responsibility for any losses that are made and for any bills. All profits are shared between them. Each partner must submit a self-assessment and pay tax on their share of profits. They must also pay PAYE and NI. The partnership must send a partnership self-assessment to HMRC at the end of every tax year.

There are two types of partnerships:

Limited Partnership: If the business has any debt that it can’t afford to pay, it is split among the partners. However, this is limited to the amount they initially invested.

Limited Liability Partnership: Partners are limited in their liability for any debt the business has. They are only liable for the amount they invest. All responsibilities and how profits are to be shared are set out in an agreement.

These are the basic types of businesses that you can have. Each one can have employees, and if you do, you will need to register as an employer with HMRC and submit payroll information on a regular basis.

To find out more about the different types of businesses, and how to set up a business, read this article on the Gov.uk website provides quite a lot of information as to what types of business structures there are.

If you have any questions, please don’t hesitate to contact us via the Contact Us Page, our Facebook Page, or on Twitter or leave a comment below.

More actual than virtual

A growing trend allowing small business owners to free up some of their precious time is the use of a VA – a virtual assistant. As a company offering business services, it felt right to partner with a VA and be able to help our clients in even more service areas. We found a great one to get us started – Lucy – and here are some of the things she could help you with:

  • Invoicing
  • Follow-ups
  • E-mail filtering
  • Online research
  • Compiling reports/presentations
  • Appointment scheduling
  • Travel planning

Particularly if you’re the organised type, it’s easy to think more often than not that it is simply “quicker to just do that myself”. It’s only once you’ve started outsourcing some of the ongoing time-consuming tasks that it then becomes clear it actually is worth it. Once the training/handover part is done and that person is more familiar with your business, the delegation of tasks is very productive. Having someone that you don’t need to provide a desk and computer for and that only charges for the time spent assisting you each month is very economical and allows you to focus on your core skill area. Some owners detest the admin side of the business and having someone else do it relieves stress. Loyal VA logo edited
For example, if you came to Ihelm Enterprises for bookkeeping and also needed someone to manage your diary, we would directly refer you to our partner virtual assistant so that you could make arrangements with her. Soon afterwards, you’ve created more time by outsourcing your bookkeeping and diary management and can focus on what you do best for your business.

Continued Professional Development

html5 certificate

Anyone who is running a business, especially a service-based business, knows that in order to provide the best possible customer support you can, you need to continually keep on top of the latest “thing” in your industry. That “thing” could be:

  • software
  • technology
  • legislation
  • a number of other skills needed for running your business and providing your service

There are so many ways to continue with CPD (Continued Professional Development), and if you belong to some associations – like the Institute of Certified Bookkeepers for example – then you will have to make sure you obtain so many CPD points in a given year, and that you obtain the right type of CPD.

There are different types of CPD, and if you belong to a professional body they will outline exactly what sort of CPD you need to acquire, and how many hours or points you need. There are also many different ways you can acquire CPD.

In my case, in order to maintain my membership with the ICB, I am required to do 30 hours of CPD per year, and this is to be made up of structured and unstructured activities. Structured activities include:

  • attending branch meetings
  • seminars
  • training courses
  • obtaining more qualifications

Unstructured CDP is easier to achieve as it involves things like:

  • reading magazines/blogs/newsletters
  • meeting with clients
  • discussions with colleagues

I am constantly working on continued professional development with keeping on top of the latest rules concerning running a business or being self-employed, reading all of the newsletters I receive from my association and software companies, and doing various training courses. My clients can be assured that I am always striving to better my knowledge so I can offer them a fantastic service.

At Ihelm Enterprises though, continued professional development isn’t just for the bookkeeping and payroll side of things – we also continue to improve our knowledge of the latest technology, website software, and anything to do with websites and website hosting. Just recently myself and Michael completed an Introduction to HTML5 course and we both received a distinction. The course wasn’t very in-depth, but it gave us an introduction to the new CSS elements available with HTML5 and the best ways to implement them. This will, in turn, help us to help our clients with maintaining their websites and with making sure they are using the most up to date CSS elements. I am also currently working on a course that is introducing me to the top 5 social media trends for small businesses.

CPD does not have to be expensive. You can sign up to blogs and receive newsletters for free and there are all sorts of courses out there that are not expensive. You do need to be wary of courses that are free or are of low-cost as not all of them will provide you with the best information out there. I would suggest researching the courses or getting recommendations from other people that you know, to make sure the course offers you exactly what you are after.

CPD may not be mandatory in your line of work, but if you don’t work at improving your knowledge and skills, and keeping on top of the latest information for your sector, you won’t be able to offer the best service possible to your customers. Making sure that you continue to improve your skills is an important aspect of running a business, and something all business owners should do.

Don’t Risk Losing Money by Choosing the Wrong Business Name

So you’ve decided to set up your own business and you’ve chosen a name, but what do you do next? I’ve listed below four things you should do before setting your business name in stone.

  1. Check the name isn’t registered on Companies House. Even if you aren’t setting up a limited company, if the name is registered on Companies House than you cannot use it.
  2. Check to make sure the domain name is free by using a site like 123-reg.
  3. Search online to make sure there aren’t any other businesses in your area doing the same thing, with the same name.
  4. Check to make sure the name hasn’t been trademarked by visiting the Intelectual Property Office website.

Make sure your business name is definitely available to be used before spending money on marketing material. You don’t want to spend money producing business cards for example, and then find out that you can’t use that name.