Business structures

Every business needs a ‘structure’, which really means the type of legal structure the business operates under so everyone knows what type of business you are. There are three main types.

• If you roll out of bed and decide suddenly ‘I want to be my own boss’ then you automatically become a ‘sole trader’. You don’t have to do anything else.
• If you want to partner up with someone else then you could form a ‘partnership’, ideally with an agreement but not always.
• If you want to separate the business from your personal life, then you may want to form a company, where you need to register and go through a process before this can happen. The  Companies Office will help you, with the first step being to register for an i-govt login so you can access all their services.

Why do you need to decide on a structure?

 Inland Revenue has different tax rates for different structures, and your customers might want to know if you are a company or sole trader, so they know who they are contracting with. Anyone you owe money to will want to know if they should chase you, your partner, or the company.

Some people transition from sole trader to partnership to company, as each structure becomes slightly more complicated. There are a few other legal structures but these three are the most common. The best place to start is choosing a business structure, and then seek professional advice from your accountant or business adviser on what works best for you.