Sole trader- you are personally responsible for your business and you run your business as an individual. Advantages of this are that any profits are solely yours and that you can make decisions on your own, however disadvantages are that you may have less of a chance to make profit compared to a partnership business.
A media example of this would be starting up a photography business by yourself
Partnership- A single business in which two or more people share ownership. Each partner contributes to all aspects of the business- including money, property, labour or skill. Advantages are that the ability to raise funds may be increased with more than one owner and that partnerships are easy to establish. Disadvantages are that disputes can happen over decisions that need to be made or lack of effort, and the distribution of profit can be an issue.
A media example of this would be starting a video production company with someone who was good at the filming side of things if you were only good at editing or vice versa.
The legal aspects of small businesses
Health and safety law at work (1974) affects all employers no matter how small, and therefore still affects small businesses. Employers must take responsibility for their safety, as well as the safety of their employees.
Employers need to ensure that their staff are trained in safe working practices. If using equipment (e.g camera) specific training must be given and protective clothing must be supplied if necessary (if they are on location).
Businesses which employ staff are legally required to take out 'Employers liability insurance' and the minimum they can take out is £5million worth of cover, and the insurance certificate needs to be clearly displayed at the workplace.
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'Any business employing staff is legally required to take out employer’s liability insurance with a minimum of £5 million worth of cover. The insurance certificate must be clearly displayed on the premises.'
The tax liability of small businesses
Tax is 'A compulsory contribution to state revenue'; and is paid so that the country can keep running. Businesses have to pay 20% whatever their size, although businesses with headquarters in another country do not have to pay tax. An example of this is Apple.
Most people pay tax through PAYE which is a system in which your employer takes the tax before you get your wages, in self employed cases tax is paid through a self assessed payment.
If you do not pay tax then HM Revenue and Customs will take certain enforcement actions to get your owed money. E.G Make you bankrupt or close down your business.
V.A.T or Value Added Tax is a type of tax that the public are required to pay for goods or services.
You charge V.A.T in addition to the cost of the service or goods provided when you sell something, but eventually V.A.T is given to the government as it is money they use to deal with trades.
The V.A.T rate currently stands at 20% in the UK, however certain items such as alcohol or cigarettes have more tax on them.
National insurance is 'a system of contributions paid by workers and employers towards the cost of certain state benefits'.
You pay National insurance with your general tax through your employer and your payslip should show your contributions.
Generally you pay 12% tax if you have a job, but circumstances such as being self employed change this.
Funding
Charity backed loans such as The Prince's Trust usually help out younger entrepreneurs from 18 to 30 in starting up a business and offer free workshops and a business mentor.
Financial systems
There is software which helps to manage VAT, invoices, stock, budgets, and payroll. An example of this is Sage which costs £20 a month for up to 20 employees.
Credit control
Credit control is used to know who you're dealing with and in theory to do this; all you have to do is keep information on your customers or traders and ensure that money is paid to you or to them when necessary.
