The Different Types of Business Status in The UK

Please click on the following headings to learn more...

Sole Trader

Private Limited Company

Public Limited Company

Limited Liability Partnership

Guarantee Company

Sole Trader

This is the simplest form of company, requiring no registration other than the notification of your local tax office, but it is also the type of business exposed to the greatest personal risk: as a sole trader, you are responsible for all aspects of the company, and have unlimited liability to all debts and legal actions. You may find it more difficult to attract outside investment or partners, which can hinder the expansion of the business. You might also find it more difficult to attract business – you do not have to file accounts or records with Companies House, giving a lack of company transparency, and making it impossible for potential customers to verify your background via an official third party.

As a sole trader you are effectively the business, for example Joe Bloggs trading as JB Design. If the business were to fold with debts you would have to settle these debts from your personal assets.

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Private Limited Company (Ltd)

A private limited company is a legal entity in its own right, separate from those who own it, the shareholders. The limited liability, potential tax advantages, and simplicity of running a private limited company make this the most common form of registered business in the UK. As a shareholder of a private limited company, your personal possessions remain separate (unless they are secured against the business for borrowing), and your risk is reduced to only the money you have invested in the company and any shares you hold which you have not yet paid for. The minimum requirements for a limited company are detailed here.

In addition to limited liability this form of company is also considered to be more prestigious by other companies and the general public due to its legitimate nature and the way important information is recorded at Companies House. Anyone wishing to do business with your limited company can verify who is connected to the company and also the financial position of the company by paying Companies House a small fee. You may not consider this transparency to be a benefit to you personally but it is consider a huge advantage when doing business.

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Public Limited Company (Plc)

A public limited company differs from the private version in that it is able to sell its shares to the public, and may be quoted on the stock exchange or alternative investment mark et. A public company must satisfy Companies House that at least £50,000 worth of shares has been issued before it is entitled to begin business or borrow money, and two directors must be appointed. The cost of running a public limited company are considerably higher, and so this form of business is better suited to large organisations.

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Limited Liability Partnership (LLP)

This allows business partners to enjoy the benefit of limited liability, avoiding the problems of joint and several liability that apply to ordinary partnerships. While there are no shares in this form of company, and tax arrangements remain the same as for ordinary partnerships, a partnership deed will need to be drawn up to specify, among other things, how profit is split and what happens in the event the partnership is wound up. To form an LLP please contact us to discuss.

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Guarantee Company (non profit)

In simple terms, a guarantee company is a not-for-profit company, and is the type most often formed by charitable organisations. A guarantee company does not have share capital, and the members do not own the company – they are decision-makers for the company, but do not receive any profits, and have no claim on the company's assets. All income generated is used to cover operating costs and to achieve the objectives of the company. To form a Guarantee Company please contact us to discuss.

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