Starting a business is an exciting process, but it can also become somewhat confusing. You’ll be faced with lots of choices that will have a significant impact on how you run your business down the line, and it’s important that you’re well-informed.
When starting a business in the UK, it’s important to understand the different business structures available, and choose the one that best suits your needs. Here, we go through some of the most common business structures in the UK, and what you need to know about each of them.
Sole trader
This is the simplest and most common business structure in the UK. As a sole trader, you’re considered the sole owner of your business, and are personally liable for any debts. You are also responsible for registering for self-assessment with HM Revenue and Customs (HMRC), and keeping records of your business income and expenses.
Partnership
A partnership is another common business structure, in which two or more people share ownership and control of the business. The partners are ‘jointly and severally liable’ for the debts of the business, and are responsible for registering for self-assessment with HMRC and keeping an accurate record of business income and expenses.
Limited Liability Partnership (LLP)
An LLP is a type of partnership that offers the benefits of both a partnership and a limited company. Like a partnership, an LLP has two or more partners. However, unlike a partnership, the partners in an LLP have limited liability, meaning they are not personally liable for the debts of the business. LLPs are also required to file annual accounts with Companies House, and their members must register for self-assessment with HMRC.
Limited Company
A limited company is a separate legal entity from its owners and shareholders. The shareholders are only liable for the debts of the company to the extent of the amount they have invested in the company. A limited company must file annual accounts and annual returns with Companies House, and register for corporation tax with HMRC.
Community Interest Company (CIC)
A CIC is a special type of limited company that is set up to benefit a community or a specific social group. CICs are required to file annual accounts and annual returns with Companies House, and register for corporation tax with HMRC. CICs are also required to submit an annual community interest report that demonstrates how the company has met its community interest objectives.
Clearly, there’re a lot of choices available when choosing how you structure your company. The most common business structures in the UK are Sole trader, Partnership, Limited Liability Partnership (LLP), Limited company, and Community Interest Company (CIC). Each structure has its own advantages and disadvantages, so it is important to understand the legal and financial implications of each, before making a decision.
It’s also important to note that the regulations and requirements for each structure may change over time, making it important to stay informed and seek professional advice when setting up and maintaining a business in the UK.
