In the UK, there are several types of business structures that entrepreneurs can choose from when starting a new venture. Each structure has its own advantages and disadvantages, so it’s essential to understand the options available and select the right one for your business.
Sole trader:
A sole trader is an individual who runs their own business, and they are responsible for all aspects of the business. They are personally liable for all the business’s debts and liabilities, and they must pay income tax on their profits. This structure is simple to set up and operate, making it a popular choice for small businesses.
Partnership:
A partnership is a business structure where two or more people share ownership of the business. Each partner contributes to the business and shares the profits and losses. Partnerships can be either general or limited, with the latter offering limited liability protection.
Limited Liability Partnership (LLP):
An LLP is a hybrid structure that combines the benefits of a partnership and a limited company. LLPs have a separate legal entity, and partners are not personally liable for the company’s debts. They must pay tax on their share of the profits, and the business must file annual accounts with Companies House.
Limited Company:
A limited company is a separate legal entity from its owners, and it can sue and be sued in its name. Shareholders own the company, and they are not personally liable for its debts. There are two types of limited companies: private and public. Private limited companies are the most common and have restrictions on the number of shareholders and the transfer of shares.
Community Interest Company (CIC):
A CIC is a type of limited company designed for social enterprises that want to use their profits and assets for the benefit of the community. CICs have a legal obligation to use their profits for social purposes, and their assets are locked in for community benefit.
Co-operative:
A co-operative is a business structure where members share ownership and control of the business. Co-operatives can be set up as either a limited company or an unincorporated association. Members have a say in how the business is run, and profits are shared among members based on their contributions.
The different types of business structures in the UK include sole trader, partnership, limited liability partnership, limited company, community interest company, and co-operative. Each structure has its own unique features, and it’s important to choose the right one for your business based on your needs and goals.
