The Different Types of Business Status in The UK
The following guide is designed to help you understand the various
structures and formats of UK businesses, from sole trader to PLC.
Please click on the following headings
to learn more...
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.
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.
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.
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.
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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