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Choosing the right business structure in the UK is crucial for determining the legal and financial aspects of your business. Shelley Bonney, Associate Solicitor for WSP Solicitors talks through the different types of business structure and the key considerations for business owners when selecting the right one.
As a sole trader, you will be the sole owner of the business. This structure is simple and easy to set up, with minimal legal and administrative requirements. You will have full control over the business, but you will also have unlimited personal liability for business debts.
A partnership involves two or more individuals who share ownership and responsibility for the business. There are two types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners have unlimited personal liability for business debts. In a limited partnership, there are general partners with unlimited liability and limited partners with liability limited to their investment.
An LLP is a hybrid structure that combines the flexibility of a partnership with limited liability protection. It offers limited personal liability for the partners and allows them to manage the business collectively. LLPs have more administrative requirements and must be registered with Companies House.
A private limited company is a separate legal entity from its owners. It provides limited liability protection to shareholders, meaning their personal assets are generally protected from business debts. A private limited company must be registered with Companies House, and it has more formal administrative requirements, such as filing annual accounts and conducting annual general meetings.
A public limited company is similar to a private limited company but can offer shares to the public and be listed on the stock exchange. PLCs have more regulatory requirements and are subject to additional scrutiny and reporting obligations.
Assess your tolerance for personal liability. If you prefer limited personal liability, consider forming an LLP or a private limited company.
Understand the tax implications of each structure. Consult with an accountant to determine which structure offers the most tax efficiency for your business.
Consider the flexibility and growth potential of each structure. If you plan to expand or attract outside investors, a private limited company or PLC may be more suitable.
Evaluate the legal and administrative obligations associated with each structure. Some structures, such as private and public limited companies, have more regulatory requirements and formalities.
Consider your long-term plans for the business. If you anticipate going public, seeking external investment, or transitioning ownership, a private limited company or PLC may be more appropriate.
It is advisable to seek professional advice from your solicitor and accountant when thinking about the structure of your business. They can both guide you through the process and help you choose the most suitable business structure based on your specific circumstances and goals.
If you would like to speak with one of WSP Solicitors’ dedicated Company Commercial Team, you can use on the sidebar of this page. Alternatively, you can call us on 01453 847200.
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