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Does the dream of being your own boss keep you up at night? Are you ready to risk anything to finally make it happen? Or have you already taken the first step?

Over the past 10 years, we’ve helped a number of entrepreneurs find answers to various questions that arise when starting a new business. Today, we would like to share advice on the two most common questions that we hear from our clients: what legal type of business to choose and whether it is better to start a new business or to buy one.

What legal structure of business to choose?

One of the most important questions that any entrepreneur has to answer when setting out to begin a business is what legal structure to choose for this. As there is no single best answer here, in case we will go through a number of questions that let us recommend the most financially viable and suitable option. For example, we will ask how much the client knows about the legal matters limiting his business, what his position is towards taking personal financial risks, what his views are on taxation, how much he is ready to invest in setting up and running of the company, etc. We also go through the advantages and disadvantages of the main legal forms to help make the decision easier.

Sole trader
Being a sole trader means that you won’t have to invest too much time in starting up the company and will probably pay less tax but, at the same time, you’ll be personally liable for all financial obligations of the business. Worst case scenario, this might mean losing your personal assets; having a sole trader status also means having accounting responsibilities.

Limited company
If you’ve decided to start a limited company, you’ll have more reporting and management to undertake. You’ll also be required to register the company with the Companies House and will be paying higher taxes than a sole trader.

However, if you’re concerned about personal liability, this type of business might be something you want to look into, as the company’s finances are absolutely separate from your personal finances. This means that there is no threat to your personal assets.

Setting up a limited company requires more time than starting to operate as a sole trader. You can set up a limited company yourself, but it is always safer to seek help or guidance from a consultant or an accountant.

Partnership
This type of business is the way to go if you’re planning to start a business with another person. Your business partner and you will be held liable for your business’ debts and you’ll also have accounting responsibilities.

When working with a client, we always seek to choose the type of business that brings least risk, greatest profits and lowest taxes.

Is a new business always the best idea?

Another very common question that we hear from our clients is whether it is better to start a new business or simply to buy one. While starting something from scratch is always tempting and might be very rewarding (both financially and emotionally), it is not for everybody. Sometimes even months of hard work prove to be fruitless.

For this reason, quite a few entrepreneurs go the other way and choose to buy a business. Of course, it also requires quite a lot of time and effort to find a business that has potential. But, if you find the right one for yourself and the market, you might be able to enjoy the benefits of your new investment much more quickly than by new starting a business from nothing.