Sorry I'm very late to this thread - you may have already asked an accountant, or made a decision, but if not hopefully I can help!
You will need to either go down the partnership route or form a limited company as you will want to share the profits between you and your husband - trying to run the businesses as 2 separate sole traders would be a bit of a headache!
From a administrative point of view, running the business as a partnership will be much simpler. In order to trade as a partnership you would need to:
- Decide on a partnership name and nominated partner (which of you is responsible for keeping the business records and dealing with HMRC)
- Register the partnership with HMRC by 5 October 2021 (assuming you take over the business before 5 April 2021). If you take over after 5 April, you will not need to register until 5 October 2022 (at the latest). This can be done through HMRC's website here https://www.gov.uk/set-up-business-partnership/register-partnership-with-hmrc.
- Register you and your husband for self assessment tax (if you are not already registered) by the same date.
- File a partnership tax return, and individual self assessment tax returns, annually with HMRC. These are due by 31 January each year - your first partnership return will be due on either 31 Jan 2022 (if you take over before 5 April 2021) or 31 Jan 2023 otherwise. The partnership itself will not pay any tax - all of the profits will be allocated to you and your husband, and you will personally pay the tax on these.
The advantages of trading as a partnership are that you don't need to file statutory accounts with Companies House or run a payroll (unless you have other employees). Also the businesses's money belongs to you personally - if there is money in the business and you need it, you can take it out.
If you wanted to trade as a company, you would need to:
- Choose a company name, and check on Companies House if the name is available
- Register the company with Companies House
- Set up a payroll scheme to pay you and your husband
- File statutory accounts with Companies House by 9 months after the end of your accounting year.
- File accounts and corporation tax returns with HMRC by 12 months after the end of your accounting year.
- Pay the corporation tax due to HMRC by 9 months and 1 day after your accounting period end.
- File an annual 'confirmation statement' with Companies House.
There are advantages to trading as a company rather than a partnership, and if you ask an accountant to look after your accounting and tax affairs, all of the above should be taken care of and not be too much of a burden on you. It will cost you a little more in accountancy fees, although these should be offset by a smaller tax bill.
As Steve notes above, one of the biggest attractions of a limited company is the 'limited liability' status. In other words, if the company owes money, you are not personally liable for this. However you may find for some things (such as a bank overdraft) you are required to personally guarantee the loan, especially if it is a new company with no trading history.
In terms of the tax advantages, if the annual profits were £30,000 (excluding your salaries), based on today's tax rates you would save about £562 in tax trading as a company instead of a partnership. If the profits were £50,000, you would save just over £1,000.
However with a company, one of the biggest disadvantages, and the thing that many business owners struggle with most, is that cash in the company belongs to the company not to them personally. If the company has made profits, they can draw dividends from the company. They can (and should) also pay themselves a salary from the company. However if there are no available profits to pay dividends any money taken out of the company is treated as a loan to the shareholders, which can result in additional tax charges.
I know this is a rather long answer, but as you rightly say there is a lot to think about when setting up in business! A good accountant should guide you through the pros and cons of both options, and help you choose the one that is right for you and your business. Good luck with your new venture!