There are three types of business entity in the UK including sole trader, partnership, limited company. They are diversified from others in legal requirements, allocation of profits, hierarchy authorization and other aspects.
A sole trader is an unincorporated business usually run by one person. The owner will be taxed as self-employee through HMRC.Advantages
Remember to keep all tax related documents such as bank statement, dividend vouchers, payslips, etc. You can simply hand these documents to us in the year end and we will prepare your self assessment return for you.
A partnership is where two or more people come together to carry on a business, trade or other activity. There are two forms of partnership in the UK, limited partnerships and limited liability partnerships (LLP).
Trading as limited partnership, the liability of debt will be split between partners. General partners can be personally liable for all the partnerships’ debt. Limited partners are only liable up to the amount they initially invest in the business.
In limited liability partnership, partners aren’t personally liable for debts the business can’t pay and their liability is limited to the amount of money they invest in the business. The allocation of shares and profits are set out in partnership agreement.Advantages
A limited company is another organization to set up business. Each company must appoint a director owing the responsibility of running the business.
Most limited companies are limited by shares which means the shareholders’ responsibilities for the company’s financial liabilities are limited to the value of shares that they own but haven’t paid for. The shareholders are the owners of company. Any profit it makes is owned by the company and can be shared by shareholders. Public limited company can trade its share on public market.Advantages
In summary, each business organization have benefits and shortages. The adoption of structure depends on the objectives, style and authorization hierarchy of company. In summary, in tradition sole trader is only suitable for small business with limited capital such as constructor, plumber and small retailer etc. It may enjoy the benefits of low cost and fewer statutory requirement however the business structure will stop the company growing and achieving high profits. Partnership is appropriate for high expertise business like accountants, solicitors etc. Limited company is the most widely used business organization. It attracts capital and human resources for company development. Meanwhile company can be beneficial from tax efficiency and positive public image.
The above information and calculations are for illustrative purposes only. No liability is accepted by O’Brien S & Co Ltd for any actions or losses from investment in reliance on the information and calculations. Consult a qualified professional financial advisor before making any financial decisions. O’Brien S & Co Ltd holds the copyrights in all materials on the website. All rights reserved.