When you start a business, one of the first things you’ll have to do is decide how you want to structure

it.
This can be quite daunting the first time. However, its relatively simple. There are five major classifications
of business ownerships.

 Sole trader
 Limited Liability Partnership or Limited Partnership
 Limited Company
 Unincorporated association
 Ordinary business partnership

The type you choose ultimately affects the legal responsibility such as the paperwork required to start
your business, the taxes you will have to pay, how you take the profit from your businesses and to what
extent will you be responsible if your business does not succeed.

1. Sole Traders

Sole Traders tend to be best suited to more local or specialist companies or individuals. You, as the owner,
have the full control. Customers often tend to view sole traders as more personal and are therefore more
likely to use them in matters that are sensitive. Although there are some great advantages of being sole
traders, there are some large disadvantages. However, it also means that you have unlimited liability
which means that if the business suffers any loss, then you are fully responsible. Business owner’s home,
savings or other assets could be at risk even when they’re outside of business. A sole trader often finds it
hard to get funds which can, in some cases, cause problems with expansion. You must register with the
HMRC, if you start a business as a sole trader.

2. Limited Company

Limited companies are the most common in the UK and come in three forms.

 Public Limited
 Limited by Guarantee
 Limited by shares

Shares of public limited companies are traded in public stock markets such as the London Stock Exchange.
On the other hand, limited by guarantee companies operate in such a way that the shareholders back up
the companies for a fixed set amount. And if the company goes in debt or is unsuccessful, they are
personally liable up to that fixed amount. Most of the companies in the UK are limited by shares which
means that each one of the shareholders is liable for the value of the shares that he has purchased. In this
type of company, directors are not responsible for the financial loss as long as they don’t break the law.
To register for a limited company, one needs to register first with Companies House in the UK. Although
there are now a number of online services that can make this process a lot easier, the directors are legally
obligated for running the company. It includes submission of annual returns to the Companies House,
sending the HMRC a company tax returns, registering for VAT at the right point, putting together statutory
accounts and following and obeying all the other laws in the UK.

3. Partnership
A business partnership is established when a group of people or partners start a business together. Now
the partner can either be an individual or it can be another limited company. Each of the partner shares
both the losses and the profits. Your partnership must be registered with the HMRC. All the partners are
obligated to pay the taxes on profits and as well as registering the business for VAT. But we can see that
Homer is not looking for any partnerships so we will not go into the detail.

4. Limited Partnerships

Limited liability partnerships or limited partnerships are structurally very similar to the above discussed
partnerships. The major difference, however, is the amount that the partners shall be liable for in case
the business becomes insolvent. In a limited partnership, limited partners are only liable for the amount
that they have contributed or invested whereas the general partners are responsible for debts of the
company. In a limited partnership there must be at least one general partner and one limited partner.
However, limited partners do not get a say in how the company or business should be run or how their
money is invested. There are some tax advantages to owning a Limited Liability partnership

5. Unincorporated association

Unincorporated Association is an organization that is formed when a group of people or a sole individual
start trading for non-profit reasons. This type of business is not at all suitable for Homer considering the
nature of his business.

Responsibilities of an employer

They way that you set up your business will have an effect on how it is run and the profit you will be able
to draw from it. Well you can change the business structure later.

Contract of employment is a legal agreement between you and your employees and is the basis of
employment. The terms of the contract should clearly communicate the job title, salary, probation period,
hours of work, number of holidays etc.

The law is clear that there should be no discrimination in the workplace. Discrimination on the basis of
age, disability, gender and gender reassignment, sexual orientation, marital or civil status, pregnancy and
motherhood, religion, race and belief are illegal.

Employees have the right to get protected from physical harm and you have statutory. Statutory means
you have a legal responsibility to keep your employees safe. Employers have a legal duty under the Health
and Safety Information Employees Regulations (HSIER) to make their employees aware of the Safety and
health laws

In 1974 an act of Parliament was passed called the Health and Safety at Work Act. These laws are the ones
that you should use to keep your employees safe. You must carry out risk assessments to minimizes risks
at work. There are systematic ways of evaluation possible dangers involved in an activity or in a place of
work. Risk assessments are essential in helping taking rational steps to prevents damage. The major
reason of doing a risk assessment is not to have a lot of paperwork and administration but it is to identify
hazards, and investigate how might someone be harmed and who is more likely to get harmed.

You have a legal obligation to make sure your employees can receive a proper first aid if he encounters
an accident.
According to The First Aid at Work Regulations 1981, you have a statutory obligation to have highly skilled
First Aiders in your company that have fully equipped and up to date first aid kits.

A wide range of manual handling is covered by Manual Handling Operations Regulation 1992. You have a
legal responsibility to assess the risks associate with the type of lifting and handling carried out in your
depot.

The Data Protection Act 1988 also protects how you use the data about the people or your employees.

Dismissing a Director

In public company’s memorandum and articles of association, section 128 of companies act 1965
provides: “Shareholder may be ordinary resolution remove a director from office before the expiry of his
term and appoint another in his stead”.

Under section 128, Those people who want to get rid of a director are obligated to serve a special notice
of intension to the company at least twenty-eight days before the conference. The company sends a copy
of the notice to the concerned auditor, who may reply and require that the said reply be given to all the
relevant people.

At the members’ conference, the director shall be entitled to speak to the people. The decision to remove
the director will be decided through a voting process. It is passed if it obtains more than half of the votes
casted.

If the director is chosen at the same conference to replace the eliminated director, the new director shall
be asked for resolution of his turn to retire. If no one is appointed to replace the dismissed director, the
vacancy may be filled as a casual job position.

The removed director may claim damages or compensation for the end of his employment as a director
where the company has entered in a contract with the director and the it breached it by dusmissing him,
he may claim compensation.

Advise to Homer (Conclusion):

As a sole trader, you may consider changing your business structure and form a limited company. This will
mean that the company is a separate legal entity to you, and the company keeps any profits it has made.
To make a limited company you will need to sign up with Companies House. You will need:

 An address for the company

Check what your standard industrial classification code is, this is what identifies what your company does..
Once you have all these details, you will have to pay 12 pounds to register online with Companies House.
Alternatively, you can register via post but this costs 40 pounds and can take longer to process. When you
receive a certificate of incorporation, your company can then begin actively trading. If you don’t already
have a bank account setup in the name of your limited company then this tends to be the next step. As
your limited company is a separate legal entity, it needs a separate bank account. It also makes things
much easier when having to undertake accounting processes when your limited company has commenced
trading. At the earliest opportunity you should inform HMRC that you stopped, or intend to stop working
as a sole trader working as a sole trader. You will still have to submit a personal tax return the following
year as a director and a shareholder. You must register with HMRC to pay corporation tax within three
months of doing business. This means if your business has made purchases, sales, done by any advertising,
rented a property, or employed someone. Ensure that you do register otherwise you may face getting
fined. To register you will need your Unique Taxpayer Reference. This will have been posted on you. When
you incorporated your business. You will also need your company registration number, the date you
started trading and the date our accounts are made out to. You will receive a deadline to pay your
corporation tax. It is really important that you keep accurate records for preparing accounts and paying
corporation tax. And with the looming prospect of making tax digital, it may be worth considering the use
of cloud accounting. You need to make sure that keep all receipts, expenses, sales and purchases and you
will need records of any company assets liabilities. You will need to keep these for six years after the tax
year that they relate to. If you have taxable profits of up to 1.5 million, you corporation tax payment will
be due nine months after your company year-end, to avoid any fines. If your profits are above this
threshold, you will pay the tax in installments.