What type of business?

 

A quick guide to business structures

 

Two high level comparisons are provided below. These are:

 

1. Differences between a Sole Trader (self employed) and a Limited Company

 

2. Differences between a Partnership and a Limited Liability Partnership (LLP)

Tel: 01252 850058, Mob: 07789 773 985 , email: lynda.lawson@legalservicesforbusiness.co.uk

Lynda Lawson trading as Legal Services For Business is a sole practitioner authorised and regulated by the Solicitors Regulation Authority under number 515697.

VAT registration number 136070536. The materials on this website are provided for general information purposes only and do not constitute formal legal advice.

 

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1. Differences between a Sole Trader (self employed) and a Limited Company

 

 

 

 

Status

Sole Trader

 

Limited Company

 

 

 

 

Business activity

You can run your own business under your own name or a trading name and can employ staff

 

This is a separate legal entity from you as its manager and shareholder which runs up its own debts and can own assets

 

 

 

 

Tax treatment

You are taxed as an individual

 

The company will be subject to corporation tax and the directors / shareholders salaries / dividends will be liable to income tax

 

 

 

 

Personal liability

There is no distinction between your assets and those of the business so If the business fails, your assets are at risk

 

Liability of the shareholders is limited to the amount they have paid or agreed to pay for their shares

 

 

 

 

Regulation

You are unregulated, although there may be other regulatory controls depending on the nature of the business you are operating

 

The business must be operated in accordance with the provisions of the Companies Act 2006

 

 

 

 

Privacy

Public Record Filing requirements:

No requirement.

 

Public Record Filing Requirements:

Memorandum and Articles of Association (companies formed after 1st October 2009, will no longer be required to file a Memorandum of Association);

Annual return detailing its registered office, directors (and secretary, if applicable) and shareholder;

Annual accounts within 9 months of its financial year end; and

Certain changes to its constitution such as allotment of shares, certain resolutions, alterations to its Articles of Association, reductions in capital and the appointment / resignation of the directors and secretary

 

 

 

 

Capital

Any effort to secure finance is likely to require personal guarantees and/or security over your personal assets

 

It may be possible to secure finance for the business against the assets of the business, although in some cases, lenders may require personal guarantees and/or security over the assets of directors

 

 

 

 

 

 

 

 

2. Differences between a Partnership and an LLP (Limited Liability Partnership)

 

 

 

 

Status

Partnership

 

Limited Liability Partnership

 

 

 

 

Business activity

The nature of the relationship between partners is typically recorded in a partnership agreement which is a private document negotiated by the partners. In the absence of any agreement, the relationship will be governed by the Partnership Act 1890 which in essence treats all partners as equal.

 

The structure of the relationship between partners is typically recorded in a limited liability partnership agreement which is a private document negotiated by the partners. In the absence of any agreement, the relationship will be governed by the Limited Liability Partnership Act 2000.

 

 

 

 

Tax treatment

The partners will be liable to pay income tax.

 

The partners will be liable to pay income tax.

 

 

 

 

Personal liability

There is no distinction between the assets of the individual partners and those of the business so if the business fails, your assets are at risk and you will also be liable for the negligence of your fellow partners.

 

The liability of the partners is limited to the capital contribution each has made to the business.

 

 

 

 

Regulation

The business is unregulated, although there may be other regulatory controls depending on the nature of the business you are operating.

 

The business is required to comply with certain statutory requirements.

 

 

 

 

Privacy

Public Record Filing requirements:

No requirement.

 

Public Record Filing Requirements:

Annual return detailing its registered office and its designated members and members;

Annual accounts within 9 months of its financial year end; and

Details of changes in membership.

 

 

 

 

Capital

It may be possible to secure finance for the business against the assets of the business, although in some cases, lenders may require personal guarantees and/or security over the assets of the partners.

 

It may be possible to secure finance for the business against the assets of the business, although in some cases, lenders may require personal guarantees and/or security over the assets of the partners.