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Legal Status

The legal status you choose for your new business will determine many factors in relation to the administration and your personal responsibilities.

There are two ways for your new business to trade - limited company or unlimited? There are benefits and disadvantages to both. The MGroup can provide a detailed understanding of the consequences of incorporating or remaining unincorporated and advise you of the best route before you actually set up your business.

Unlimited - If you do not want to incorporate your new business, in the eyes of the law, you and your business are one and the same. The income and expenditure of the business is, in effect your income and expenditure. The profits of the business are deemed to be income of the owners of the business, be that either you as a sole trader or you with your business partners, if you are in a partnership.

Limited company - Shares are issued to the owners of the company and directors must be appointed. There is an increased administrative burden for limited companies, as they have to prepare accounts in accordance with Company law. The accounts must then be filed with Companies House. The directors have extra responsibilities to ensure the company complies with Company law. One of the major benefits of incorporating is that the shareholders have limited liability. This means if the company does fail the liability of the shareholders will be restricted.

There are other factors to consider when deciding whether or not to incorporate. The tax consequences, how to withdraw profits from the business, and the image of the business to potential clients are just some of these issues.