Business

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Scottish technical

Business structure

So what is a business structure: Business structures are predetermined processes established by the government of each country through which a business chooses to govern itself, become liable for tax and keep important financial records.

It is a mouthful because I am trying to get everything into it. In other words a business structure is:

  1. Established by the government
  2. Helps an individual starting in business to be free to choose the structures they prefer (as long as they meet the criteria)
  3. In place to determine the time and method of taxation


The good news is that none of the business structures chosen are cast in stone. It is possible to always change the structure you choose if you or your business has outgrown the process.

In the UK there are several types of business structures; the common ones are:

  1. Self-Assessment aka Sole Trader aka Self-Employed
  2. Limited Companies aka Ltd. aka Limited by shares
  3. Charities aka CIO’s, aka Charity
  4. Limited by Guarantee Companies
  5. Community Interest Companies aka CIC
  6. Partnerships
  7. Limited Partnerships






You must set up the company with Companies House and let HM Revenue & Customs (HMRC) know when the company starts business activities.

Every financial year, the company must:

  • put together statutory accounts
  • send Companies House an annual return
  • send HMRC a Company Tax Return

The company must register for VAT if you expect its takings to be more than £77,000 a year.

If you’re a director of a limited company, you must:

  • fill in a Self Assessment tax return every year
  • pay tax and National Insurance through the PAYE system if the company pays you a salary


Pedlary


Sole Trader

  • https://en.wikipedia.org/wiki/Sole_proprietorship - also known as the sole trader or simply a proprietorship, is a type of enterprise that is owned and run by one natural person and in which there is no legal distinction between the owner and the business entity. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss, etc.
  • one person as sole owner
  • recieves all profits
  • offset of debts/tax by other income sources
  • unlimited liability - everything you own can be sold to pay debts
  • banks and other financial sources reluctant to loan to sole traders


Partnership

Ordanary (General) Partnership

  • 2 to 50 members
  • members taxed individually at the end of year
  • members share in profits and debts
  • partner can be an individual or a limited company
  • unlimited liability - everything you own can be sold to pay debts
  • ascicles of association - agreement on how profit is shared, how a partner leaves or joins, holidays, etc. not legally required but important (esp. on money).
  • sleeping partner - doesn't manage, there for the investment vehicle
  • administrative partner - looks after the books
  • all partners share desicion making
  • unless stated in articles of association, normal partners are jointly and severally liable - all partners liable for actions of one
  • if one partner leaves, the partnership needs to be restarted

Limited Partnership (LP)

A limited partnership is like any other (general) partnership, except that there can be members of the partnership who have limited liability. In order to be a limited partnership, registration (but not the filing of accounts) with Companies House is required. There must be at least one general (unlimited) partner (that can be a limited company) and limited partners cannot take part in the management of the partnership.

  • register with to companies house
  • at least one general and limited partner
  • general partners are liable for company debts
  • limited partners are liable for the amount they have invested
  • limited partners have no say in the running of the business and cannot withdraw investment

Limited Liability Partnerships (LLP)

An LLP is actually a body corporate (a company) as a matter of law, which affords all of its members legal liability, but is taxed as a general partnership.


Corporation

  • register with to companies house
  • company name must be unique
  • articles of association - public document
  • shareholders agreeement - private document
  • easier access to investment, though personal guarantees sometimes required for SmE
  • can raise money through selling shares
  • can be private or public
  • does not depend on named partners
  • taxed after salary payment

Limited Company (LTD)


  • register with to companies house
  • can now be registered by one director/shareholder (or more)
  • directors are responsible for - accounting, annual returns, tax return, VAT (when required), complying with legislation
  • subscription to a memorandum of association
  • subject to PAYE/NI taxes above the personal allowance threshold
  • separate legal entity to people involved, all involved are employees
  • limited liability - based on shares owned, directors are not liable
  • salery - per whatever
  • benefits - car, health, travel allowence
  • dividends - extra pay to shareholders from company profit in the year
  • further pay is a loan




Public Limited Company (PLC)

  • business information and desicions need to be made public


Limited Liability Company (LLC)


Employee owned


Holding


Agency




Community interest company (CIC)

  • Register with to companies house, £35
  • Community interest statement, must have clear mission and community
  • Comminity benefit test by CIC regulator
  • Limited by guarentee or shares / IPS/CBS / co-operative
  • Anuall submission to CIC regulator of details accounts, CIC report and Annual Return
  • Asset lock - assets for community use only, limits on dividends and interest to shareholder
  • Trustees and guarentees, rather than directors and shares
  • No dividends, used to run a social enterprise business model
  • No tax breaks
  • Attractive to social enterprises



Charity


  • YouTube: Charity structures - playlist of videos by law firm Russell-Cooke explains the different types of structures available for charities and community groups and highlights the advantages and disadvantages of each one.
  • exist for exclusively charitable status
  • provide a public benefit


  • YouTube: Charity Commission registration - Claris D'Cruz, a barrister at Wrigleys Solicitors LLP, gives a practical overview of when and how to set up and register as a charity.


  • OSCR - Scottish Charity Regulator (OSCR) is a Non-Ministerial Department and part of the Scottish Administration following commencement of the Charities and Trustee Investment (Scotland) Act 2005. We are the independent regulator and registrar for over 24,000 Scottish charities including community groups, religious charities, schools, universities, grant-giving charities and major care providers. Our work as Regulator ultimately supports public confidence in charities and their work.


Charitable trust

  • incorporated
  • no seperate legal body, so changes required contracts to be rewritten
  • traditional, easy to set up
  • trustees and beneficiaries (service users)
  • regularted by charity commision/OSCR
  • contracts are between trustees and landlords, etc.
  • trustees are indemnified by charity assets against financial claims, but still liable beyond that
  • no members

Unincorporated associations

  • https://www.gov.uk/unincorporated-associations - an organisation set up through an agreement between a group of people who come together for a reason other than to make a profit (for example, a voluntary group or a sports club). You don’t need to register an unincorporated association, and it doesn’t cost anything to set one up. Individual members are personally responsible for any debts and contractual obligations.
  • Easy to set up
  • Governing documents - articles of association, constitution, whatever
  • Not a trust or corporation
  • Trustees - or whatever management name
  • Members - just trustees or broader group
  • Member roles - elect trustees
  • Group of individuals trading for other than profit
  • No seperate legal body, so changes required contracts to be rewritten
  • Corporation tax, tax returns
  • Trustees and members legally responsible for debts
  • Cost nothing to setup, do no neeed to be registered


Community Benefit Society (IPS/CBS)


Company limited by guarantee (LBG)

  • Apply to companies house
  • Separate legal entity
  • Subject to compand and charity law - dual reporting/regulation
  • Governing document - memorandum and articles of association
  • Directors who are charity trustees
  • Members - similar to shareholders, limited by guarantee, no legal duties, free to vote how they wish (unlike CIO)
  • Members can change the articles by special resolution, three quarters have to vote.
  • Limited liability - unlike a charity, members give a guarantee of a certain sum toward company finance if the company is wound up, usually a pound.
  • No dividends, used to run a social enterprise business model
  • Can get Gift Aid
  • Access to grants
  • Minimum £5000 income?


Charitable incorporated organisation (CIO/SCIO)

  • https://en.wikipedia.org/wiki/Charitable_incorporated_organisation - a new form of legal entity designed for non-profit organisations in the United Kingdom. The main intended benefits of the new entity are that it has legal personality, the ability to conduct business in its own name, and limited liability so that its members and trustees will not have to contribute in the event of financial loss. These are already available to limited companies; charities can be formed as companies, but then they must be registered with both Companies House and the Charity Commission. In contrast, the CIO only needs to register with the Charity Commission. This is expected to reduce bureaucracy for the charity.

The CIO status became available to charities in England and Wales on 4 March 2013. In Scotland, the Office of the Scottish Charity Regulator began registering Scottish Charitable Incorporated Organisations (SCIOs) in April 2011.

  • Limited liability
  • Sole regulator - charity commision
  • New CIOs can't do anything with company until registered, unlike pivoting trusts or unincorporated associations
  • Trustees and members
  • Foundation model - trustees and members are the same
  • Association model - members are wider group than trusteed
  • Governing document - constutition (fountation or association)
  • Trustees - as a charity
  • Members - have legal duty to act in good faith to further the puroises of the CIO

Business model

Social Enterprise


Business plan


Legal

Contracts

IR35






Licencing

See Free/open

Data Protection

See also Security

Terms and conditions

"Your business website must include your address and contact details, privacy policy, terms and conditions, exchange and refund policy, quality commitment and information about delivery and payment. Stock availability and pricing should be kept up to date and you must state how much VAT and post and packaging is payable per item." [3]

Trading standards

Duty

Freelance work


Contracting

  • IPSE (The Association of Independent Professionals and the Self Employed)

Consulting

Proposals

Examples

Remote

Networking

Support

Setting up

Scottish Government

Business Gateway

  • Scotland's Business Gateway provides practical information and help to you and your business. Whether you are starting out or looking to grow your business, this site will help you find support, offer you the latest on regulation and tax, and provide an access point for other public sector services you might need now or in the future.

Scottish Enterprise

Edinburgh

Edinburgh University

Chambers of Commerce


Social Enterprise

  • Senscot - For Social Entrepreneurs in Scotland
  • Firstport supports new and emerging social entrepreneurs across Scotland.


Other

  • SCOTBIS (Scottish Business Information Service) National Library of Scotland access to market research reports, business databases, international directories, and business and trade journals.
  • Scottish Business in the Community is one of the Prince's Charities in Scotland, supporting and challenging its private sector members and its partners to improve their impacts on the economy, environment and society.
  • ScotlandIS- Trade body for the information and communications technologies (ICT) industry, ScotlandIS represents around 200 software, telecomms, IT and creative technologies businesses throughout Scotland.
  • MEDIA Antenna Scotland - Creative Scotland also hosts and co-funds MEDIA Antenna Scotland, the information office of the European Union’s MEDIA Programme which offers a wide variety of funding for film, television and new media. MEDIA offers funding for development, training, distribution, markets and festivals.
  • Creative Scotland offers a range of investment opportunities across the arts, screen and creative industries through a range of initiatives, projects and activities designed to develop talent, audiences and businesses across the country.

UK

Europe

Funding

  • Funding Scotland - Signposting funding opportunities for Charities, Community Groups and Businesses around Scotland.
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