Do I need to officially form as a company or sole trader?

rageagainstessays

I'm thinking I don't want to be done for tax fraud or anything.
I'm 16 and a student at sixth form studying my A levels.
I have started advertising for clients and other company to become affiliated to me.
I estimate that this business could make me around £3000 a year only, which I noticed was below the income threshold for national insurance contributions and income tax payments. Also how much does it damage credibility for such a company and is it illegal not to register, also how does this effect me legally
As I think there will need to be contracts between me and my affiliates that ensure I receive payment when I prefer my clients to them.

steve1980

If you're running this as a business then you need to register as a sole trader with HMRC.

I'm slightly confused as in one breath you are saying you're advertising for clients to become affiliated to you but then you say that you are prefer (referring?) your clients to them.

rageagainstessays

steve1980 wrote: »

If you're running this as a business then you need to register as a sole trader with HMRC.

I'm slightly confused as in one breath you are saying you're advertising for clients to become affiliated to you but then you say that you are prefer (referring?) your clients to them.

Basically what I will offer is a comparative service: My clients will be the people I try and tailor solutions to, my affiliates are the professionals that will make offers to my clients. I will be paid for my services in the form of commission from my affiliates agents.

Emmzi

you need to register as self employed and then claim the exemption for NI conts as low income from self employment.

Also read up on limited companies. Pros: some protection personally against debts
Cons: costs, probably too much for your start up year

Mistral001

HMRC will want to know if you are making income that will attract tax. If you are they will want to know about it. See an accountant if you are unsure about it.

persa

At 16, you're just old enough to set up a limited company if you would like, but for £3,000 projected net profits in year one and an uncertain future, I can't say I'd recommend this to you.

Forming a limited company involves lots of one off costs, continuing costs and legal responsibilities which can get you fined and/or chucked in jail if you don't comply with them. It's not something to be done lightly.

Based on your projected profits, to avoid paying any tax, you would have to register as your own employer if you went the limited company route, which would be an added complication.

My advice to you is to give HMRC a call, let them know you're setting up as a sole trader and want to apply for a small earnings exception. If your business takes off the ground, you can always incorporate from a sole trade into a company later on. See if your business idea works first before chucking too much money at it!

Lavendyr

http://www.businesslink.gov.uk/bdotg/action/layer?r.s=tl&topicId=1073858805

Read and inwardly digest.

Notmyrealname

samc1234 wrote: »

I estimate that this business could make me around £3000 a year only, which I noticed was below the income threshold for national insurance contributions and income tax payments. Also how much does it damage credibility for such a company and is it illegal not to register, also how does this effect me legally
As I think there will need to be contracts between me and my affiliates that ensure I receive payment when I prefer my clients to them.

It is illegal to trade without either registering as a sole trader if you're operating as such or forming a Ltd Company and doing it that way. How does it affect you? Fines, possible conviction for tax evasion depending on length of time and amount earned and they decide what they think you've earned and tax you on that in the absence of being able to prove income and expenditure.

You have one problem at the moment though I think. As far as I am aware it is the case that as you are not legally defined as an adult you cannot form legally binding contracts with your clients which is commercial suicide when it comes to "Terms of Business", which covers such things as liabilities and payment terms, and will prevent you doing business with many if not all of them. Your best bet would be to form a Ltd company with someone over the age of 18 acting as Company Secretary or Director. They can then sign contracts etc on behalf of the company until you become 18.

rageagainstessays

Notmyrealname wrote: »

It is illegal to trade without either registering as a sole trader if you're operating as such or forming a Ltd Company and doing it that way. How does it affect you? Fines, possible conviction for tax evasion depending on length of time and amount earned and they decide what they think you've earned and tax you on that in the absence of being able to prove income and expenditure.

You have one problem at the moment though I think. As far as I am aware it is the case that as you are not legally defined as an adult you cannot form legally binding contracts with your clients which is commercial suicide when it comes to "Terms of Business", which covers such things as liabilities and payment terms, and will prevent you doing business with many if not all of them. Your best bet would be to form a Ltd company with someone over the age of 18 acting as Company Secretary or Director. They can then sign contracts etc on behalf of the company until you become 18.

Hmm, that is true. But I don't think the LTD Structure suits me at this current time. Also does anyone know if an 'agreement' is the same thing as a contract?

Lavendyr

http://www.netlawman.co.uk/info/entering-contract-minor.php

"A minor can therefore, enter into a contract. However, the law always assumes that a minor cannot understand the implications of a contract. So, whatever caveat is drafted into the contract, a minor will remain protected even to the disadvantage of the other party.

Further, a contract with a minor is void able. The minor is able to cancel any contract at any time prior to reaching the age of majority and for a reasonable period after that time. There is no requirement for the minor to have a justifiable reason for this, it can be done on a whim or where it may be advantageous to the child to do so."

persa

Why don't you have a look at Shell LiveWIRE? There are plenty of entrepreneurs your age there (and/or who were your age when they first started trading). They might be able to offer advice on what they did to convince other traders to work with them at 16?