Types of Business

A guide to the different types of business structure in the UK.

Sole Trader

Partnership

Limited Company

 

Sole Trader

Unlimited Liability

Simple to operate

Fewer Filing Duties

Requiring minimal set up and administration, operating as a sole trader is common for new businesses. Registration at Companies House is not required although the business owner should notify HMRC. This type of business is not deemed to be a legal entity in its own right, consequently the owner of the business has unlimited liability to all debts and legal actions.

Whilst sole traders benefit from fewer regulations and reduced filing requirements, the personal risk associated with this type of business may act as an incentive to register as a limited company. 

 

Private Limited Company (LTD)

Requirements for forming a Private Limited Company

 At least one director over the age of 16 must be appointed.

 The company must have a registered office in the UK.

 The company name must comply with Government regulations

 At least one share must be issued at the time of incorporation.

A private limited company is a legal entity in its own right and is separate from those who own it in the eyes of the law. This is a major benefit to operating as a limited company as the liability of the shareholders is limited to their investment and any unpaid shares they own. The personal assets of a shareholder would not be exposed if a limited company is dissolved.

Due to the limited liability, potential tax advantages and simplicity of operating as a limited company this is one of the most popular business structures in the UK. Once the company is incorporated, information regarding the filing history and current appointments is made public available on the Companies House register. This affords limited companies with a level of transparency which is regarded as a significant advantage when doing business.

Limited Liability

Transparency

 

Public Limited Company (PLC)

In parallel to its private counterpart, PLCs exist as legal entities in their own right. Furthermore the liability of the members is limited to their investment and the value of their shares. In contrast to a private limited company, the shares of a PLC can be traded in the public market and this is often used to raise finance. 

The operating costs of running a PLC are considerably higher than private companies and this structure is generally suited to larger enterprises.A minimum of £50,000 worth of shares must be issued before a company can be registered as a PLC.  It is also a legal requirement for at least two directors to be appointed.

Shares can be traded

High operating costs

Minimum of £50,000 shares

 

Limited Liability Partnership (LLP)

Profit driven

Minimum of two members

Limited Liability

Operated in a similar way to a traditional partnership, an LLP is also afforded the benefit of limited liability. The objectives of an LLP are generally profit driven and this structure is favoured in professions such as law and accountancy. A minimum of two partners must be appointed as the ‘designated’ members and it is these partners who are responsible for the day to day running of an LLP.

You can find more information a Limited Liability Partnerships here.

 

Guarantee Company (Non Profit)

Limited by Guarantee companies are, quite simply, not for profit companies. Any profits generated are reinvested into the company and are used to achieve the objectives of the company which are often charitable in nature. The members of this type of company are classed as decision makers rather than owners of the company.

For more information on forming a company limited by Guarantee please contact us.

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Simple Formations is a trading name of Small Firms Services Limited. We have been trading since 1998 and are one of the UK's longest standing Company Formation Agents

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