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Demystifying Business Structures in the UK: A Quick Guide for Entrepreneurs

Updated: Jul 5

Wednesday 6th March 2024

When starting your business journey, the first question that many startup business owners or aspiring entrepreneurs ask themselves is: What are the different types of business structures?

The structure you choose will have significant implications on the amount of tax you pay, the degree of your personal liability, the amount of administrative work involved, and even your ability to raise finance. 

Choosing the right business structure lays the foundation for success. Here's a breakdown of the main types:

Sole Trader: 

What Is It?: You are a self-employed/sole trader if you run your own business as an individual or work for yourself. 

👥 Key Features: Simple setup, full control, but personally liable for debts. 

Ideal For: Solo ventures, freelancers, and small businesses. 

Limited Company:

What Is It?: A Limited Company is a type of business which is legally separate from its owners (typically shareholders) and those appointed to run it (directors). 

🏢 Key Features: Separate legal entity, limited liability, and potential for growth.

Ideal For: Businesses aiming for expansion and increased credibility. 


What Is It?: In a Partnership, you and your partner (or partners) personally share responsibility for your business. They share the risks, costs, benefits, and responsibilities of running an organisation. 

🤝 Key Features: Shared responsibilities, flexibility, but joint liability. 

Ideal For: Small businesses with shared ownership and responsibilities. 

Limited Liability Partnership (LLP):

What Is It?: An LLP is similar to a partnership except that the partner's liability is limited to the amount of money they invest in the business. An LLP can be incorporated with 2 or more members, and a member can be an individual or a company.

🤖 Key Features: Combines features of a partnership with a limited company, offering limited liability. 

Ideal For: Professional services firms and businesses with multiple partners. 

Understanding the nuances of each structure is pivotal for making informed decisions. Which structure aligns with your business goals?

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