UK Legal Forms

There are 4 basic types of business entities in the UK. I will not be including the plc, the Public Listed Company, as this is a Limited Company with more onerous legal and reporting requirements.

  • Limited Company
  • Limited Liability Partnership
  • Partnership
  • Sole Trader

They all have their own individual advantages and disadvantages, which I will briefly discuss below.

Limited Company

This is a separate legal entity, which is registered with both Companies House and HM Revenue & Customs. It is run by the directors and owned by the shareholders, which don’t necessarily need to be the same parties. Shareholders can be individuals and other corporate entities.

Advantages

  • Separate legal entity
  • Shareholders not liable for company debt, only to the extent of their capital contributed
  • Flatter tax rates

Disadvantages

  • Shareholders could get double taxed on taking their money out of the company

Limited Liability Partnership

This is also a separate legal entity, which is registered with Companies House and HM Revenue & Customs. It is run and owned by the partners, and can have corporate entity partners.

Advantages

  • Separate legal entity
  • Partners liability for debts is limited
  • Has some benefits regarding the taxation of partner benefits

Disadvantages

  • Taxed according to the partners’ individual tax rates

Partnership

This is a formal agreement between a number of individual parties, which is registered with HM Revenue & Customs.

Advantages

  • Simple to set up and run
  • Has some tax planning benefits regarding the taxation of partner benefits

Disadvantages

  • Taxed according to individual partner tax rates
  • No limited liability
  • Needs to be changed every time a partner joins or leaves

Sole Trader

The easiest to set up and run, and just involves one party acting on their own.

Advantages

  • Simple to set up and run

Disadvantages

  • Owner is fully liable for all debts
  • Limited opportunity to expand
  • Taxed at highest rates
Consultinghouse UK

Klaus Schottler, CPA

Managing Director
Email me


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*Copyright Consultinghouse 2017. All services offered on this website are provided by Consultinghouse UK Limited. Consultinghouse UK is a boutique management consulting firm and professional services provider. Consultinghouse UK provides tax and management consulting as well as services with regard to accounting of current business activities, the generation of payslips, as well as the registration for payroll tax. For legal services please contact our cooperation partner http://www.counselhouse.eu.