Business Start-up Guide October 2016 | Page 4

Companies themselves pay corporation tax on their profits after paying your salary but before your dividend distribution. Effective tax planning requires profits, salary and dividends to be considered together. There are many advantages as well as disadvantages to operating through a limited company. There are additional administrative factors involved in running a company, such as annual statutory accounts preparation, company secretarial obligations and PAYE (Pay as You Earn) procedures. A big advantage of owning a limited company is that your personal liability is limited to the nominal share capital you have invested: this can be as little as £1. 1.4 Limited Liability partnership A Limited Liability partnership (LLP) is legally similar to a company. It is administered like a company in all aspects except its taxation. In this, it is treated like a partnership. Therefore, you have the limited liability, administrative and statutory obligations of a company but not the taxation and national insurance flexibility. Nevertheless, it is becoming increasingly popular, not least among professional firms which were previously structured as traditional partnerships but which now find that unlimited liability is potentially onerous. The UK LLP structure is also used for tax planning by some overseas resident businesspeople. 1.5 Co-operative A co-operative is a mutual organisation owned by its employees. One example of such an organisation is the John Lewis Partnership. These structures need specialist advice. 2 Business Plans for Start-ups New businesses should always have a business plan. It is the key to success, one of the most important aspects of starting a new business and it enables you to set clear objectives for your business as well as clarifying your thinking. A Start-up Business Plan will also help you to set targets for future performance and monitor finances and profitability. The content of the business plan should cover the following areas.  Overview  Description  Personal  Product  Marketing  Practices