Business Structures: Choosing the Right Option for You

Choosing the right business structure is one of the first and most important decisions any entrepreneur will make. The structure you choose affects how much tax you pay, your personal liability for business debts, and how your business is perceived by customers, suppliers and investors.

Sole trader

Operating as a sole trader is the simplest way to start a business. You are personally responsible for the business's debts and obligations, but you keep all the profits after tax. Registration with HMRC is straightforward and there are minimal reporting requirements.

Partnership

A partnership involves two or more people running a business together. Each partner shares the profits and is jointly liable for the debts of the partnership. A partnership agreement should be put in place to govern the relationship between the partners and to deal with issues such as profit sharing, decision-making, and what happens if a partner wants to leave.

Limited company

A limited company is a separate legal entity from its owners. The liability of the shareholders is limited to the amount they have invested in the company, which means personal assets are generally protected from business debts. However, running a limited company involves more administration, including filing annual accounts and a confirmation statement with Companies House.

Limited liability partnership

A limited liability partnership (LLP) combines the flexibility of a partnership with the limited liability of a company. Each member's liability is limited to the amount they have invested, and the LLP itself is a separate legal entity. LLPs are popular with professional services firms.

If you would like advice on choosing the right business structure, please contact our corporate team.