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Business Legal Structures
Business Legal Structures
Why do I need to think about the legal structure of my business?
You and HM Revenue & Customs need to be clear about the legal structure of your business. This is because it will affect various important matters such as:
- who has a say in business decisions
- the records and accounts you need to keep;
- your financial liability; and
- the amount of tax you pay
How do I choose what legal structure to have?
You should choose the type of legal structure that will best suit you. If you are not sure, you may wish to consult an Business Link adviser.
Find an accountant on the Institute of Chartered Accountants in England and Wales website.
What types of legal structure are available?
The following types of legal structure are available:
- Sole trader (you will have self-employed status)
- Partner (you will have self-employed status)
- Limited liability partnership
- Limited liability company
- Franchise
- Social enterprise
What are the advantages and disadvantages?
Sole trader
It is fairly straightforward to set up as a sole trader and you will get all the profits. However, you will have unlimited liability and will be responsible for any debts your business builds up.
Partner
Partnerships are fairly easy to set up and you will benefit from mutual support and shared experience and knowledge. However, all the partners will have unlimited liability and will be responsible for business debts.
Limited liability partnership
Limited liability partnerships involve less personal financial risk. However, they are costlier and more complex to set up than a partnership.
Limited liability company
Limited liability companies involve less personal financial risk than being a sole trader or partner. However, you will have to meet a number of extra legal requirements, including filing accounts at Companies House.
Franchise
Taking on a franchise enables you to be part of an already successful and established business. However, you will not be fully ‘your own boss’ as you will have to abide by the terms of the franchise agreement, and probably pay some of your profits to the franchiser.
Social enterprise
Social enterprises are businesses set up to tackle a social or environmental need. You may find this more satisfying than a conventional business. Most of the profits are ploughed back into the business to help achieve its aims.
Where can I get more information?
Register with us now to benefit from the professional expertise of one of our 200 highly experienced and knowledgeable business advisers.