If you are starting a new business venture in the UK, one of the critical decisions you’ll need to make is selecting the appropriate business structure.
Your chosen structure will have significant implications for your legal and financial responsibilities, tax obligations, and the overall growth potential of your business. A survey carried out by Go Self Employed showed business structure type was the most confusing topic for people starting a new business.
In this article, we will discuss the four main types of business structures in the UK: Sole Trader, Partnership, Limited Company, and Limited Liability Partnership (LLP), along with the pros and cons of each – hopefully making things clearer for people starting out.
A sole trader is the simplest business structure, often favoured by small businesses and self-employed individuals. As a sole trader, you are the sole owner of the business and personally responsible for its debts and liabilities.
- Easy to set up and operate, with minimal paperwork and administrative requirements.
- Complete control over your business, allowing for quick decision-making.
- The ability to keep all profits after tax.
- Unlimited liability for business debts and obligations, potentially putting your personal assets at risk.
- Limited access to funding and investment opportunities.
- Potential difficulty in separating personal and business finances.
A partnership is a business structure where two or more individuals come together to form a business. Partners share the profits, losses, and responsibilities of the business.
- Shared responsibility, which can lead to a more diverse skill set and improved decision-making.
- Greater access to funding and resources compared to a sole trader.
- The potential for increased motivation and commitment due to shared goals and a sense of camaraderie.
- Unlimited liability for all partners, meaning each partner is responsible for the business’s debts and…
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