When looking to start out in the restaurant business its is important to get your legal structure right. Find below the most common type of structures and a brief overview of them.
A sole trader set up also commonly known as self employed means that you and your business are the same entity.
Setting up as a sole trader can be great because its easy, flexible and generally cheaper compared to other structures.
There are also great tax reliefs available to you in the first 4 years of trading especially if your business is expecting to make a loss in the early years of trading.
However, as a sole trader, you will be liable for all the debts in the business which means that in times of bankruptcy your personal assets may be on the line.
Partnerships are basically 2 or more sole traders who own the business in the form a partnership.
A partnership generally has the same tax reliefs available as a sole trader would have and is an easy way to start trading without the formalities when compared to other structures.
Partners are generally equal for the debts of the business. A partnership should have a strong partnership agreement to avoid any nasty situations further down the line.
A Limited Company is a separate legal entity from the owner. This means that the owner may own 100% shares in his / her company but the owner is not the company itself.
For the reason above, any assets or debts belong to the company and not the owner.
A Limited Company is the most common used type of structure which offers its own range of tax reliefs and generally an a lower overall effective rate of tax.
Operating a Limited Company requires greater compliance and is generally more expensive to operate.