If you are thinking of setting up your own business, you will naturally want to know about the different types of business structure that are available in the UK. Here is a summary of the types you need to know.
Essentially, there are three main legal business structures in Britain – the sole trader, the partnership and the limited company. Each has its own legal requirements, which extend to accountancy, tax, compliance requirements and so forth.
Sole traders
This structure requires minimal administration and set up and is a common approach for new businesses, requiring no registration at Companies House. The business is not a standalone legal entity and the owner has unlimited liability in legal actions and any debts. There is risk associated with this structure, but the benefits of lesser tax filing requirements and regulations.
Private limited company
These are legal entities and the law considers private limited companies as separate from the owners. This means that the liability of the shareholders is limited to their shares and investment. If the company dissolves, the shareholder will not lose his or her personal assets. There are good tax advantages to this structure, which makes it very popular. The registration requirement with Companies House means that the structure is also transparent in its workings, which is also advantageous when doing business.
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Public limited companies
PLCs are also legal entities, with the liability of the owners limited to their share value and investment. The shares of PLCs can be traded publicly to raise finance, which is one of the key ways that a PLC differs from a private limited company. The PLC operating costs are also far higher than for a private limited company. This structure is generally used by bigger companies, with £50,000 worth of issued shares required as a minimum requirement for registration and at least two directors. These larger organisations tend to use external services such as outsourced accounting services from providers such as https://www.mushroombiz.co.uk/homepage/services/accounting/.
Limited liability companies – or LLPs – are also a structure that is often found in professional industries, as they offer limited liability benefits. Again, there must be at least two partners who take responsibility for daily operations. Guaranteed companies also exist as a non-profit alternative, with profits reinvested into the operation and used to drive its charitable objectives forward.