Finally, you have become the overnight sensation you have been dreaming of, after all the years of slogging on your blog! Your blog pops up on Facebook, Twitter and Instagram and you have millions of followers liking it and the money is now pouring in.
Carrying on as a self-employed person might not be viable now and so you might consider incorporating. You will still need to keep a record of all your income and expenses as I mentioned in the first two blogs. You will also need to look at your income tax whether you are self-employed, a partner or a director of your own company as I mentioned in the third part of this series. In this blog I will look at the different types of business structures you can have.
There are three main types of business structure: sole trader, partnerships or limited companies. There are pros and cons to all types.
Sole traders and partnerships are generally good if you are just starting up and don’t plan to make much and are still unsure as to how your business is going to work out. These types of business have less admin costs and the only tax you need to worry about is the personal tax.
A limited company is good if you have a long term plan of expanding in terms of products, services, employees and you hope to make a profit in the future. A limited company has more structure and in the long term there can be more tax benefits.
Informing HMRC and Companies House
Once you’ve decided your business structure, you need to tell everyone. By this, I mean not just on Facebook, twitter and blogs and all your friends and family but you need to inform HMRC and Companies House.
If you are a sole trader or partnership, you need to let HMRC know that you will need a self-assessment tax return and that you will be paying class 2 tax as soon as you have registered. You will also need to take into account class 4 tax when you start making a profit.
If you are a limited company, you need to inform HMRC of self-assessment for yourself personally as a Director of the company. For the company, you need to register for corporation tax and if you have employees and pay yourself a salary, then you need to register for payroll taxes.
Finally, depending on your turnover you may need or want to register for VAT. These are the main taxes for a company. You also need to register your company with Companies House.
As usual, if you would like any further details on this or any other accountancy matters, please follow this link:
To catch up with the rest of the posts in this series, follow the links below: