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Which structure will best suit you...?

The right business structure is crucial for your success. Whether you opt for a Sole Trader, Limited Company, or Partnership, each has its own advantages and considerations. Let's explore which structure might be the best fit for you.

Sole Trader

What it is

  • Easiest way to start a business; you can begin trading immediately with minimal setup.

Advantages

  • Low start-up costs.

  • Full control—fast decisions, no partners to consult.

  • Financial information stays private.

  • Often well-tuned to local customers and niche tastes.

Disadvantages

  • Business can suffer if the owner is ill or on holiday (unless a trusted manager is in place).

  • Long working hours are common.

  • Harder to raise finance; lenders see higher risk.

  • Often higher prices than bigger rivals (no bulk-buy savings).

  • Unlimited liability: the owner is personally responsible for all business debts and could lose personal assets.

Legal duties (at a glance)

  • Keep proper business records and accounts for tax (and VAT if registered).

  • Comply with consumer protection laws (e.g., Sale of Goods Act–style requirements/consumer rights).

Partnership

What it is: Two+ people run a business for profit and share risks/rewards (best with a written agreement).

Types & liability

  • General partnership: Unlimited, joint & several liability for partners.

  • Limited partnership (LP): At least one general partner (unlimited) + limited partners (liability capped; no management).

  • LLP: Separate legal entity; members have limited liability; public filings required.

Tax (typical)

  • Partnership/LLP is tax-transparent: profits allocated to partners.

    • Individuals: Income Tax + Class 2/4 NI.

    • Companies: Corporation Tax.

Set-up & admin

  • General partnership: register with HMRC (Self Assessment; VAT if needed).

  • LP/LLP: register at Companies House; LLP files accounts & confirmation statement.

Pros

  • Simple (general partnership), flexible profit split, combines skills, usually private.

Cons

  • Unlimited liability (except LLP/limited partners in LP), funding harder, disputes/continuity risk, LLP has more compliance.

Limited Company

What it is

  • A business owned by shareholders and run by directors.

  • Limited liability: investors can only lose what they put in; personal assets are protected if the company fails.

What limited liability means (in practice)

  • Creditors can claim only against the company’s assets, not shareholders’ personal assets.

Key features

  • Separate legal entity (can own assets, enter contracts, sue/be sued).

  • Governed by Articles of Association (plus any shareholders’ agreement).

  • Company information (accounts, directors, ownership) is filed at Companies House.

Types

  • Private limited company (Ltd) – shares not offered to the public.

  • Public limited company (plc) – can offer shares to the public and list on a stock exchange.

Ltd vs plc — main differences

  • Share trading: plc shares can be publicly traded; Ltd shares cannot.

  • Minimum share capital: plc must have at least £50,000 issued share capital (with minimum paid-up requirements); no such minimum for an Ltd.

  • Regulation & disclosure: plcs face stricter rules and reporting.

Why an Ltd might convert to a plc

  • Access to public equity for expansion.

  • Potentially easier to raise finance (including with banks and institutions).

  • Higher profile/credibility—balanced against higher cost and regulation.

At-a-glance pros & cons

Pros

  • Limited liability protection.

  • Easier to bring in investors (share structure).

  • Continuity—company outlives changes in owners.

Cons

  • More admin and public disclosure than a sole trader/partnership.

  • Director duties and compliance costs.

  • For plcs: significantly higher regulatory burden.

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